The Procurement Process (MM)

Slide 2

Introduction (1) The procurement process involves

purchasing goods from vendors through an internal purchasing organization These goods might be used

for resale in a manufacturing process as packaging

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Introduction (2) Processes

Vendors must be managed Purchase orders are issued Goods are received into inventory Invoices are verified Payments are made

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SAP Process Diagram

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Materials Management Tasks Vendor management Purchasing Physical inventory

Inventory management (quantities) Inventory valuation

Invoice verification Materials management (MM) MRP Product catalogs

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Vendors (Introduction) Vendors sell goods to us

Some information is pertinent to the company

Some is accounting related Some applies only to a particular purchasing

organization

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Vendors (Configuration) Vendor information is divided into three

categories General data

(applicable to the client) Company code

(accounting) data Purchasing data

(applicable to the purchasing organization)

Slide 8

Vendor Data (Taxonomy) Client data (LFA1)

Client / Account number keys Contains name and address information One-time account indicator Contains the account group (KT0KK)

The vendor account group controls the transaction types possible with the vendor

Slide 9

Vendor Data (Taxonomy) Company code (LFB1)

Client / Account number / Company code keys

Reconciliation and bank account information (accounting segment)

Co/Cd gives us the link to our G/L Link to GL recon account (AKONT)

Slide 10

Vendor Data (Taxonomy) Purchasing organization (LFM1)

Client / Account number / Purchasing Organization keys

Sales person name Currency of purchase order

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Vendor (Account Group) Every vendor is assigned to an account

group The account group defines which partner

functions are allowed Partner functions for a

vendor

Slide 12

Partner Functions (Illustration)

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Organizational Structure (1) Purchasing Organization (PO)

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

Group of buyers within a PO responsible for certain activities

Slide 14

Organizational Structure (2) Purchasing can be centralized or

decentralized Centralized (one purchasing organization

for many plants) Decentralized (many purchasing

organizations) Global bikes has a hybrid purchasing

organization Global / US / DE

Slide 15

Purchasing Organizations (GBI)

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Organizational Structure (Plants 1) 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 Company It’s plants The storage locations within a plant.

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Organizational Structure (Plants 2) 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

Slide 18

Plant Table T001W• Global Bike has 5 plants• Each plant is assigned a purchasing

organization

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Storage Location Table T001L

• Global Bike uses logical storage locations

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Valuation Table 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

Slide 21

GBI Organizational Structure

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Materials Introduction Materials are the things we buy from

vendors 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)

Slide 23

Material Types SAP predefines several material types A material’s type dictates what can be

done with the material We don’t sell raw

materials for example

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Material Types (Configuration) Material types are configured through

the IMG (OMS2)

Slide 25

Material Types (Configuration) And stored

in table T134T

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Material Master Data Everything our company needs to know

about the material Data is stored in functional segments

called views Basic data Sales Materials Management Accounting MRP Etc.

Slide 27

Material Views

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Material Master (Financial) Financial data is maintained about a

material Valuation currency is the currency in which

the unit is priced Valuation class – The inventory account

associated with the material Price control

Moving average price – the average price of materials in stock

Standard price – material prices are updated periodically

Slide 29

Material Master (Financial)

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Material Master (Purchasing) Purchasing group Goods receipt processing time

Time to move goods into inventory Delivery tolerances

Slide 31

Material Master (Purchasing)

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Material Master (Plant) Environmental requirements Special storage containers or handling Shelf life Weight

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Material Master (Plant)

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Purchasing Information We purchase materials from vendors Purchasing information defines the

relationship between a vendor and a material

This information is used to create purchases from Quotations Manually

Slide 35

Purchasing Information Record Determines which materials are

supplied by which vendors Purchasing information

Pricing Lead times Availability periods Order history

Slide 36

Purchasing Documents Purchase requisition Request for quotation Purchase order Goods receipt Vendor invoice processing

Slide 37

Common Purchasing Sequence

Slide 38

Purchase Requisition 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 Manually Automatically through MRP, production

orders, or sales orders

Slide 39

Requisition Sourcing Requisitions must be assigned a source

of supply Internally

Get goods from our own plant or centralized warehouse

A list of sources Vendors who provide the particular

material Outlined agreements

Long-term purchasing agreements RFQ

Slide 40

Request for Quotation 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 Price, materials, shipping details are all

defined

Slide 41

Vendor Evaluation SAP allows you to evaluate vendors

based on Price Quality Delivery

You define scoring ranges You define detailed criteria

Slide 42

Purchase Order It’s really the acceptance contract for

the vendor’s quotation A request to procure specific materials

or services and the conditions of procurement

Slide 43

Types of Purchase Orders SAP supports different types of

purchase orders Standard For services For consignment And others

Slide 44

Purchase Order Structure Remember the structure of a document

Header information Vendor / payment terms

Item overview Materials, quantities, item delivery dates

Line items Item prices

Slide 45

Purchase Order Output All is not printed Purchase orders might be sent via

E-mail EDI Fax XML

Slide 46

Goods Receipt Here is where we receive the goods

from the vendor from our purchase order

Tasks Determine whether order is correct Update purchase order history with receipt

of goods Updates physical inventory Updates G/L account (Inventory)

Slide 47

Receipt of Goods (Events) Several events fire when goods are

received Material document created Accounting documents created Inventory is updated Purchase order status is updated

Slide 48

Vendor Invoice Processing Invoices are validated against the

corresponding purchase order Discrepancies might cause the invoice to

be blocked When processed

The accounts payable liability is created Payment process is initiated for financial

accounting

Slide 49

Financial Accounting Processing Accounting pays the invoice

Payment method Bank Items

It’s possible to pay all or part of an invoice Medium

Can be done manually or automatically

Slide 50

Financial Accounting (G/L) Transactions

Invoice Receipt

Payment Program

Goods Receipt

AP (Vendor)

Dr Cr

GR / IR

$100

BankDr Cr

Inventory

$100 $100

$100

Dr Cr

Dr Cr

$100

$100

Slide 51

Material Movement (1) SAP tracks the movement of goods in,

around, and out of a warehouse They are depicted using three digit

codes 101 – goods receipt into warehouse 103 – goods receipt into GR blocked stock 122 – return delivery to vendor 231 – consumption for a sales order 561 – initial entry of stock

Slide 52

Material Movement (2) Goods can be placed into different

destinations Into the warehouse

Unrestricted use Blocked use

Quality assurance

Slide 53