A PR is an internal document that sends notification to purchase department when some material is service is required. PR can be generated by department that needs any material or service.
A PO is a document sent to vendor by purchaser which is an official request of mentioned material or services. POs are generally binding on purchaser, though it depends on terms and conditions mentioned in PO.
Various material planning methods are used in MRP (Material Requirements Planning). Reorder point procedure (VM) Forecast-based planning (VV) Time-Phased materials planning (PD) These are specified in material creation (MM01) under the MRP 1 tab.
Yes. Use Transaction ME52N. Check to see if the PR has already had a PO issued against it. If so, you must inform the Purchasing Group. Check if the PR has been approved. If so, you may only make changes to a limited extent and may be subject of approval. Check if the PR was created by MRP. In this case, you don’t have much control over the modification process. All changes to items are logged and stored. Information stored includes when the information was changed, who changed it, what the changes were, etc.
Everything is the same as a normal PR or PO, except: Enter the item category “K” for the consignment item. This ensures that the Goods Receipt is posted to the consignment stores and an invoice receipt cannot be generated for the item. Also, do not enter a net price.
Vendor Evaluation helps you select the Source of Supply by a score assigned to a particular vendor. The scores are on a scale of 1 to 100 and are based on differing criteria. Use Transaction ME61 and enter the Purchasing Organization and Vendor Number.
The key components of Master Data are: Info Record (ME11), Source List (ME01), Quota Arrangement (MEQ1), Vendor (MK01), Vendor Evaluation (ME61), and Condition Type (MEKA).
Either use the Information Record to see who has sold a particular material to the organization in the past, or go through the Source List.
Use Transaction ME01. Enter the Material Number and the Plant Data. Enter source list records, validity period, period of time material is procurable, Vendor Number, responsible Purchasing Organization (or number of the Agreement or Contract), PPL (if the material can be procured from another plant), Fixed Source (?), MRP control. Also, a check should be done to see whether any source list records overlap.
Different Info Record types are Standard, Consignment, Sub-Contracting and Pipeline.
Planned orders are always created when the system creates an internal procurement proposal. In the case of vendor procurement, the MRP Controller may create a planned order or directly create a PR. The next step for a planned order is to be converted to a PR so it goes to purchasing and is to eventually become a PO. A planned order can be converted to a PR using transaction code MD14.
The stock supplied by the vendor is in the purchasing company’s premises but the company has no liability for the same. The liability for the company will only arise one the goods are issued from the consignment stock for use. However, in this case, even before the use, purchasing company can check in system how much stock is lying in inventory.
In Sub-contracting, we send raw material or input material to sub-contractor and then receive the finished goods. A sub-contracting PO is created with item category ‘L’. Input material is sent to vendor for processing with movement type 541. When GR is done using movement type 101, movement type 543 takes place automatically and takes care of consumed material.
When we maintain price in Info Records, we can make use of scales. It is used when price of a material is dependent on quantity purchased. For eg. For 500 pieces of material ABC, price is Rs. 10, however, if the order quantity is more than 500, price is Rs. 9. Scales are maintained in various master data like info record, quota arrangement etc. from where scales can be pulled in a Purchase Order.
A material must be flagged for deletion before deleting it using Archive and Delete program. A deletion flag can be set at client level, plant level or storage location level. Whatever level you flag a material for deletion, it is flagged for deletion at all corresponding lower levels. Transaction MM06 is used to flag a material for deletion.
Yes, even after flagging a material for deletion, it can be used till it is actually deleted. It will just trigger a warning message whenever the material is used. If you want a material to be blocked for any use with immediate effect, you should use a material status which is there in Basic View 1 for general level or in MRP 1 view for plant level blocking.
OBYC is t-code used for configuring Automatic Account Posting.
Postings are made to G/L accounts automatically in the case of Inventory Management and Invoice Verification relevant to Financial and Cost Accounting.
Valuation grouping code is used to group the valuation area, In SAP, we can have valuation level at Company code level or at plant level.
General practice is to use the valuation area at plant level, because valuation may differ from one plant to another. The valuation grouping code makes it easier to set automatic account determination. If we need to define common account determination for several valuation areas, we can assign same valuation grouping code to all those valuation areas. We can maintain the valuation group code in OMWD for various valuation areas.
pecial stock types available in SAP are Consignment, Subcontracting, pipeline, project, sales order stock, Returnable transport packaging, stock transfer, and the third party.
A contract is a pre-determined long term agreement to supply material or service for a certain period of time. Specific delivery dates are not mentioned in the contracts. Contracts can be of two types: Value Contract or Quantity contract
In Scheduling agreements, we can enter scheduling lines which gives details of quantity that should be delivered on specific date. Plant must be entered in SA so that materials can be delivered at plant. These are generally used for materials whose requirements are predictable.
New transaction codes can be created using t-code SE93.
Release Strategy with Classification:
- PR can be released at header level as well as item level.
- It can be used for both internal/external documents.
- Can be set on any field available in structure CEBAN
Release Strategy without Classification:
- PR can be released only at item level.
- It can be used only for internal documents such as PR.
This strategy can be used only on 4 parameters which are Account assignment category, Plant, Material Group and value of PR.
A batch is a subset of the total stock of a material. It represents a homogeneous unit which has unique specification. Normally, a batch is assigned to the quantity of material produced during a given production run. A batch number uniqueness can be assigned at any of the following 3 levels:
At client level: The same batch number can be assigned only once within the entire client.
At material and plant combination level: Same batch number can be assigned to material with different specification in each plant.
At material number level: A batch assigned to a material has the same specification for all plants where material is extended. Batch number can be reassigned with a different specification for each material.
While creating PO, we can tick the item as free item in item overview section of PO. The price will be zero for free marked item.
Accounting view is a plant specific view. Besides other information, it contains important information such as valuation class and price control. Valuation class helps in determining the relevant GL account used for account posting. It is also used while configuring OBYC settings. Price control indicator determines if material is maintained at Standard price(S) or Moving average price (V).
‘Material Types’ is used to group various materials based on some common properties. It helps in maintain material master data for a particular material. Using material types, we can control which all views are required for a material type, which fields are required or optional, the material number range etc.
No, a PO is released at the header level meaning a total release or “With Classification”. PRs, on the other hand, have two release procedures possible. “With Classification” as described above, and “Without Classification” where it is only possible to release the PR item by item
A Material Type describes the characteristics of a material that are important in regards to Accounting and Inventory Management. A material is assigned a type when you create the material master record. “Raw Materials”, “Finished Products”, and “Semi-Finished Products” are examples. In the standard MM module, the Material Type of ROH denotes an externally procured material, and FERT indicates that the relevant material is produced in-house.
Perform a price comparison using ME49 and one may compare quotations from different vendors.
The Source List identifies preferred sources of supply for certain materials. If it’s been maintained, it will ID both the source of supply and the time period. The Source List facilitates gaining a fixed source of supply, blocked source of supply, and/or helps us to select the proffered source during the source determination process.
The following creates a rough picture of the MM Cycle. Create material, create vendor, assign material to vendor, procure raw material through PR, locate vendor for certain material, processing GR, goods issue, and invoice verification.
Some examples are Unit of Issue, Storage Conditions, Packaging Dimensions, Gross Weight, Volume, and Hazardous Materials Number. Also, there are various Storage Strategies information and options.
Consignment Stocks remain the legal property of the Vendor until the organization withdraws the material from the consignment stores. The invoice can be due at set periods of time, for example monthly, and it is also a configuration possibility that the organization will take ownership of the stock after a certain period of time. Consignment Stock is allocated to the available stock because the Consignment Stock is managed under the same material number as your company’s stock. The most important characteristic of Consignment Stock is that it isn’t valuated. When the material is withdrawn, it is valuated at the price of the respective vendor. Before procuring the stock, consideration should be given if one consignment is coming from multiple vendors. If so, we can manage all of them independently at the price of the individual vendors.
Once a vendor has received an RFQ, the vendor will send back a quote that will be legally binding for a certain period of time. Specifically, a Quotation is an offer by a vendor to a purchasing organization regarding the supply of material(s) or performance of service(s) subject to specified conditions.
The Source List identifies preferred sources of supply for certain materials. If the Source List has been properly maintained, it will identify both the source of a material and the period of time in which you can order the material from the source.
The Invoice Verification component completes the material procurement process and allows credit memos to be processed. Invoice Verification includes entering invoices and credit memos that have been received, checking accuracy of invoices with respect to price and arithmetic, and checking block invoices (these are the ones which differ too much from the original PO).
Invoices based on Purchase Orders. With purchase-order-based Invoice Verification, all of the items of a purchase order can be settled together, regardless of whether or not an item has been received in several partial deliveries. All of the deliveries are totaled and posted as one item. Invoices based on Goods Receipts. With goods receipt-based Invoice Verification, each individual goods receipt is invoiced separately. Invoices without an order reference. When there is no reference to a PO, it is possible to post the transaction directly to a Material Account, a G/L Account, or an Asset Account. You can park Invoices that reference POs and GRs as well as Invoices with no reference in the system. When you park a document or change a parked document, neither substitution nor validation is supported.
Negative Stocks are necessary when Goods Issues are entered necessarily (business process reasons) prior to the corresponding Goods Receipts and the material is already located physically in the warehouse.
Partner Function is used to define responsibilities and duties of other business partners. Some partner functions are AZ(Alternate payee), CR(Carrier), OA(Ordering address), GS(Goods supplier), PI(Invoice presented by) etc.
Material Status helps in determining the usability of a material. It is a 2-digit code which can be maintained as plant specific material status, cross-plant material status, and distribution material status.
Price Control Indicator’ is maintained in accounting view and is used to determine how a material will be valuated. It can be Standard Price(S) or Moving Average Price(V). If the indicator is set to S, all inventory postings are posted at standard price maintained in material master. If there are variances in any transaction due to different price, the variance is posted in price difference account.
If price control indicator is set at V, goods received will be done at GR price. The moving average price will be adjusted in material master using weighted average formula. If goods movements or invoice receipts are posted using a price that differs from the moving average price, the differences are posted to the stock account.
The physical movement of stock between different physical locations is called as ‘Stock transfer’. Stock transfer can be either a single step process or a two-step process.
Various Stock transfers are:
Inter Company (Company to Company)
Inter Plant/Intra Company (Plant to Plant)
Intra Plant (Storage location to Storage location)
In SAP, commonly used stock types are:
Unrestricted Stock (Stock that is available for use)
Quality Inspection Stock (Not the unrestricted stock but can be considered for MRP)
Blocked Stock (Stock rejected by quality or production)
GR Blocked Stock (Conditionally accepted stock. Not the unrestricted stock)
Physical Inventory procedures in SAP MM are as follows:
Periodic Inventory (All stocks are counted on a pre-determined date)
Continuous Inventory (stocks are counted continuously during the entire fiscal year)
Cycle Counting (Counting is done at fixed intervals)
Inventory Sampling (Randomly selected material stocks are physically counted on the balance sheet key date. If variances are small enough, it is presumed that the book inventory balances for the other stocks are correct.)
Within a valuation area, sometimes, we need to valuate various stocks of a material separately. It can be because of different origin, quality, status, etc. We use split valuation in such cases. In this case, material is managed at several partial stocks which are sub-stocks of main material stock. Any transaction, relevant for valuation, is carried at this partial stock level. In accounting view, we define if we need split valuation for any material.
Stock revaluation can be done by following three methods:
LIFO(Last In First Out): Materials received last are consumed first. You can assume example of elevator where people who enter last exit first!
FIFO(First In Firs Out): Materials received first are consumed first.
Lowest Value Method: Stocks are valued at their original price or the current market price whichever is lower.
The top level of the organizational plan is the Client, followed by Company Code, which represents a unit with its own accounting, balance, P&L, and possibly identity (subsidiary). The next level down is Plant, an operational unit within a company (HQ, Assembly Plant, Call Center, etc.). The Purchasing Organization is the legally responsibly group for external transactions. This group is further subdivided into Purchasing Groups.
Once OBYC settings are properly done, system finds the correct G/L account using the following data:
Chart of Accounts: Chart of Accounts is determined based on plant or company code used in transaction
Valuation Grouping Code: It is determined based on the valuation area. Valuation Grouping Code is maintained in t-code OMWD.
Transaction Key: eg. BSX, GBB etc. Transaction keys are determined automatically from the transaction (invoice verification) or the movement type (inventory management).
Account grouping /Account Modifier (only for offsetting entries, consignment liabilities, and price differences)
Valuation class of material or (in case of split valuation) the valuation type: The valuation class allows you to define automatic account determination that is dependent on the material. This can be achieved by assigning different valuation classes to the materials in material master (Accounting view) and by assigning different G/L accounts to the posting transaction for every valuation class.
Since each movement type is assigned to a ‘value string’ which in turn is identified with a transaction key, the goods movement determines the correct transaction key. Transaction Keys’ are pre-defined in the system to enable transaction postings in Inventory Management and Accounting (Invoice Verification).
Examples of pre-defined transaction keys are:
BSX (Inventory Postings)
WRX (GR/IR Clearing Postings)
PRD (Cost/Price differences)
UMB (Revenue/Expenses from revaluation)
GBB (Offsetting entries in Stock postings)
BSX, WRX, and PRD are relevant for a GR with reference to a purchase order for a material with standard price control. The transaction key UMB is used when the standard price has changed and the movement is posted to a previous period. GBB is used to identify the GL account to post to as the offsetting entry to the stock account (when not referencing a purchase order) such as miscellaneous goods receipts, goods issues for sales orders with no account assignment, and scrapping etc.
The business area is an organizational unit within financial accounting. It corresponds to a defined business segment or area of responsibility, to which value movements recorded in Financial Accounting can be assigned. It is usually derived automatically as it linked to other organizational units. For eg. Business area for a combination of plant and division is maintained by t-code OMJ7.
Cost Center accounting is used for controlling purposes. It is an organizational unit within a controlling area which represents a defined location of cost incurrence. For example, any department can be a cost center for recording all expenses incurred for that department.
Profit Center Accounting evaluates the profit or loss of individual, independent areas within an organization. Profit center is an organizational unit in controlling to recognize your profit. Profit center is attached to material master at plant level.
Tax can be calculated for each line item of a PO separately based on the tax code. Earlier TAXINJ, which is a formula based tax procedure, was used. Now, TAXINN, which is a condition based tax procedure, is generally used. Tax procedure contains the condition type and necessary specification for each condition type. Account keys are assigned to condition types and these account keys determine the G/L to which the tax amount is to be posted(OB40). These account keys are maintained using t-code OBCN. (All these transactions are under Financial Accounting Global Settings Tax on Sales/Purchases Basic Settings). Tax codes are assigned to country codes and country are linked with tax procedure. Thus, based on tax code, corresponding tax procedure is determined and then calculation is done based on condition types in that tax procedure.
Scrap can be maintained in BOM as operational scrap, component scrap, By-Product or Co-Product. Common practice is to maintain scrap as by-product and receive it back along with processed material.