Table of Contents
SAP Materials Management
SAP MM covers whole procurement cycle from purchase requisition creation to invoice posting. The vendor selection procedure is very comprehensive and can be integrated with whole procurement process. Procurement can be done for material as well as services. Materials are also divided into two categories namely stock items and consumables. SAP supports all kind of procurement processes including sub-contracting, third-party, consignment and inter-company, Project related procurement.
Materials Management Process
SAP Material Management module consists of three major areas namely Procurement, Inventory Management and Invoice Verification. It is fully integrated with other application areas like, Finance and Controlling, Quality Management, Plant Maintenance, Production Planning, Project Systems, Document Management System etc.
End-to-End Procurement Cycle
SAP Materials Management cycle is depicted as above typically starts with requirements collection. In case of CLIENT most of the requirements can either come from Projects (with integration of PS module), with consumption based planning (re order point planning).
These requirements will be either assigned to firm contracts that are already available with vendors or we can convert into request for quotation and get entire process for processing short term PO or long term contract for the supply of materials.
Country India Taxation
Purchasing and Inventory Management module is seamlessly integrated with the Country India version which takes care of all kind of taxes that are tagged to Materials and services viz. Excise Duty, Customs Duty (for imports), VAT and Service tax, Works contract tax, TDS on Services rendered.
All relevant statutory reports can be extracted from the system. Many statutory reports are readily available.
Vendor Evaluation – is part of Materials management modules. It has integration with Quality Management in order to capture information on quality rankings. SAP Vendor evaluation process evaluates the vendor based on parameters such as Price, Quality, Delivery and Service. Each criterion can have its own sub criteria’s. System is flexible to define the rankings and percentage for weighing the evaluation parameters.
Inventory Management
Inventory management module deals with the internal and external movements of stock materials. It supports batch management, serial number management for better material tracking. With the help of sophisticated classification system, SAP can find any material based on user-defined features within different applications. Inventory Management also deals with physical inventory process to reconcile actual material count with book value. We will now describe each of these functionalities below:
Goods Receipt
At goods receipt user can decide the stock type to which a quantity is posted. The stock type is relevant for determining the stock available in Materials Planning and is used for withdrawals in Inventory Management. User can post a goods receipt for the warehouse into three stock types:
- Unrestricted-use stock (no usage restrictions).
- Quality inspection stock (available from an MRP perspective, but no withdrawals are possible).
- Blocked stock (not usually available from an MRP perspective and no withdrawals are possible).
In the purchase order, user can plan in advance whether the material is to be posted to quality inspection stock. When the goods are received, user decides the stock type to which the material is posted. For valuated goods receipts, the system creates an accounting document, as well as a material document. At the same time, it updates the purchase order history.
The material stocks are displayed in the stock overview for each individual organizational level. Quantities posted for a particular stock type are totaled for each organizational unit. User can display the stock overview for batches/valuation types and special stocks
Goods Issue & Reservation:
Goods issues can be planned or unplanned. SAP system uses automatic account determination to determine the G/L account to which the movement is posted. User enters a G/L account only if you want to post the goods movement to another account. If a material is no longer of use, it is posted for scrapping. If a material is destroyed, this information must also be entered in the RSAP System. User can scrap material from unrestricted-use stock, stock in quality inspection, and blocked stock. When user posts a material for scrapping, the System reduces the relevant stock, transfers the value of the scrapped material from the stock account to a scrap account, and debits the cost center entered. Sample withdrawal is a goods issue generally linked to a quality inspection. The SAP sampling procedure assures you that the sample for testing is taken from the existing stock. The sampled goods are treated as destroyed – in other words, the system assumes that the material can no longer be used after the quality inspection. In this way, sampling is the same as scrapping, with the exception that the value of the sampled material is posted from the material stock account to the quality inspection expense account.
Reservations are requests to the warehouse to have materials ready for issue at a later date and for a particular purpose. A reservation can also be used to plan an inward movement in advance. A reservation ensures that a material is available when it is needed.
Transfer Posting & Stock Transfer:
Stock transfers can be carried out from any location to another location with a creation of material document. The transfer is controlled through a movement type in the SAP system. A stock transfer consists of a goods issue from the issuing point and a goods receipt in the receiving point. User can post stock transfers in one step or in two steps.
Unlike stock transfers, transfer postings do not usually involve a physical goods movement, but a change in stock type, batch number, or material number. Examples of transfer postings include release from quality inspection or transfer from consignment material to organization’s own stocks.
Disposal of Materials:
Stocks identified by authority for disposal with relevant process will be issued (posted) for scrapping. Process will undergo raising request for scrapping / disposal of materials which will undergo approval (customization of material requisition). With reference to approved material request it will be posted to scrap account.
Physical Inventory of Materials
SAP IM provides the functionality to physically check inventory in the defined period of intervals and as a result of same system allows adjusting physical stock and book stocks. This automatically adjusts the financial entries in the background.
Invoice Verification
Invoice verification system simulates and posts vendor invoices after checking invoice amount with the received value. It provides facility of not only posting vendor’s invoice but also allows to post the invoices received from associate vendors attached with procurements such as freight, insurance, clearing and forwarding, Customs statutory invoice (BOE). Also credit memo can be booked in the same screen (which creates debit entry to vendor) for handling rejections.
Finance Integration
Integration is the most important feature of SAP Material Management. It is fully integrated with the accounting system. Any valuation related goods movement creates account postings to relevant G/L accounts. Additionally, controlling module is integrated with each of the procurement steps like PR/PO creation, GR (Goods Receipt) or Invoice Posting. System checks budget at each of the steps and notify user with relevant information. At the time of GR, we can initiate quality inspection for important materials for thorough checking.
SAP Workflow’s integrated with SAP MM
SAP’s workflow management is another strong functionality to automate any kind of approval or multi-department tasks. Some of the scenarios are vendor/material creation with different departments, PR/PO releases based on different criteria, Invoice Posting, Workflow for Goods receipt Acknowledgement, Alert workflow for Inventory falling to Re-order point, quality notification, budget approval etc.
Overview of SAP
Continue reading at https://www.trenovision.com/overview-of-sap/
