Refresher of basic Materials Management terms. Sometimes the simple things are all that matters. These slides are easy to understand and would remind you what SAP MM is all about.

1. Jaures Magloire N. A.

2.  A product hierarchy models any number of
strictly hierarchical product groups in a tree
structure
 In SAP F& R a product hierarchy is either a
“true’’ product hierarchy ( analogous to the
article hierarchy in an SAP Retail system) or a
merchandise category hierarchy. In the latter
case , the merchandise categories form the
lowest level of the hierarchy.
 Example; products could have the following
hierarchical relationship: Foods- Frozen
Foods- Pizza

3.  Status information tells you whether a material is
subject to restrictions and what they are. For example
a material may not be procurable, it may be a part
under development or one to be discontinued.
 The material may be blocked for use in certain
business activities by assigning one or both of the
following material statuses to it:-Plant specific
material status and/or ;
-Cross plant material status.
 The material can be blocked for use in certain sales
activities by assigning one or both of the following
statuses to it:-Distribution-chain specific material
status and/or ;
-Cross distribution-chain material status.
 The material can be flagged for deletion.

4.  General item category group is used in sales
processes like BOM , where we have higher
item category (ERLA) and default or lower
item category (NORM).
 General item category group would refer to a
higher level item category and item category
group would refer to a default item category.
 This field can be maintained in Basic Data
View of the material master.

5.  Item category group drives the processing of
the material type in the sales order.
 The combination of item category group and
order type determines the item category
defined for a sales order line item .
 Item category group is defined in the sales
org 2 view of the material master.

6.  A Purchasing group is a unit in charge of
purchasing in a purchasing organisation.
 It can be made up of one or more persons.
 It is attached to a Purchasing organisation.

7.  A material group is a grouping of materials
and services according to their
characteristics. This allows for easier
management and better evaluation of
materials with similar characteristics
 The materials can be grouped by the
company to meet their specific demands . It
is defined by a nine digits alphanumeric key.
 E.g. electrical appliances.

8.  Materials with the same basic attributes are
grouped together and assigned to a material
type.
 The material type determines certain basic
attributes of the material and has important
control functions. For eg it is a factor
determining the screen sequence and field
selection in a material master record.
 Examples of material types are: raw materials
and semi-finished products.

9.  MRP groups is used if and when planning per
plant is too superficial for business needs and
you want to assign control parameters that
deviate from the plant definition to specific
material groups.
 For example the creation indicator for purchase
requisitions , schedule lines, etc.
 You assign different groups according to the
requirements to run MRP.
 These settings will be taken into account when
you run MRP for single item or total planning.
 MD04

10.  The MRP controller is the person in charge of
the MRP run for the materials. It is still a
further division on the MRP and it is work
load related.
 You can have one MRP controller for materials
with different MRP groups.

11.  When determining the procurement element, the
systems finds out how procurement is to be
carried out-either as in house production or as
external procurement.
 Materials planned using consumption based
planning arte usually externally procured.
 You must define whether in house or external
procurement or both is allowed for the material
in the material master record (MRP 2 view ).
 In the Special procurement key tab,Enter “F ‘’for
external procurement and;
 “X’’ for both in house and external procurement.

12.  Valuation class is the main link between Material
Master and Finance. This valuation class along with
the combination of the transaction keys
(BSX,WRX,GBB and PRD) determine the GL Account
during posting.
 Valuation class is the stock account of a material. It is
the grouping of materials having similar properties ,
i.e. Material types and assignment of these materials
to a group of GL Accounts.
 Valuation class along with the following components
form the valuation structure of a material;-valuation
area
-Valuation category
-Valuation type
-Material type and,
-Movement type.

13.  It is a method of inventory valuation and product
costing (Price control “S’’).
 If a material is assigned a standard price “S’’, the
value of the material is always calculated at that
price. With standard price:
-All inventory postings are carried out at the
standard price.
-Variances are posted to price difference
accounts.
-Variances are updated and,
-Price changes can be monitored.
 It is generally used for semi-finished and
finished products.

14.  It is a method of inventory valuation and product
costing (Price control “V’’).
 It is typically only used on purchased materials. It
may be appropriate where the item is an easily
obtained commodity, with small fluctuations in
cost. This is due to the fact that the decision to
use moving average for certain items should
reflect the approach used to analyse contribution
margins and variances in manufacturing and
purchasing. As such the impact on margins is
minimized, reducing the need for formal variance
analysis.
 It should be used for raw materials and trading
goods.

15.  Terms of payment are conditions agreed
between business partners for the payment of
invoices. It enable the system to calculate
cash discounts and due date for the payment
of invoices.
 Terms of payment are based on instalmental
payments.
 Terms of payments constitutes several
payment terms.

16.  Payment terms are the various instalmental
payments that form terms of payment. It can
determine the following:
-The valid cash discount rate for an
individual payment with a minimum of 3
payment terms( first cash discount period,
second cash discount period and due date for
net payment) and also a baseline date for the
payment or,
-The payment terms for holdback/retainage.
 For instance,

17.  Price group is the grouping of products in a
price group, so that a fixed price can be offered
to customers for a package of the products if
they subscribe to all the products in the group.
 As a special case, you can also give discounts
based on the number of products in the price
group to which the customer subscribes.
 The current price groups and level are
recalculated dynamically each time pricing takes
place.
 You usually use dynamic price groups to offer
your customers a rebate if they purchase all the
products in the price group.

18.  A delivery is the actual putting of the items
ordered by the customer in the sales order, at
the disposal of the customer.
 Delivery priority is giving a preferential
position to individual customers. The sales
orders must be due for shipping.
 Delivery priorities range from 1 – 99, 1
representing the highest priority.

19.  Shipping points are independent
organisational entities within which
processing and monitoring of the deliveries
as well as goods issue is carried out.
 A shipping point can carry out shipping for
several plants.
 The shipping point is determined by the
following factors:
-Delivery plant,
-Shipping conditions and,
-Loading group.

20.  An Incoterm defines the terms of sales and
the passing of risk for import and export of
merchandise.
 They include the following:
-EXW-Ex Works
-FCA – Free Carriage and Freight
-FOB – Free On Board
-CIF – Cost Insurance and Freight.

21.  An organisation unit that represents an area
responsible for granting and monitoring
credit
 It is either a single company code or, if a
credit control is performed across several
company codes, multiple company codes.
 Credit information can be made available per
customer with a credit control area.

22.  In lead time scheduling the precise production times,
that is, the target start date and the target finish
date, are specified for materials that are produced in-
house.
 Capacity requirements are also created and the dates
that the components must be provided are also
determined.
 Lead time scheduling is determined by the following:
- A routing has been created for the material,
- A scheduling margin key has been assigned in the
material master record.
- You have maintained certain parameters for lead
time scheduling in customizing for MRP by choosing
define scheduling parameters for planned orders.

23.  It is defined as one type of “outline purchase
agreement’’ or long-term buying
arrangement between purchasing and vendor
or external supplier.
 Scheduling agreements provide for the
creation of delivery schedules specifying
purchase quantities, delivery dates and
possibly also precise times of delivery over a
given period.
 A scheduling agreement consist of a number
of items for each of which a procurement
type is defined.

24.  In SAP SD a payer is one of four partner
functions, namely:
- Sold to party
- Ship to party
- Bill to party and,
- Payer.
 The payer is the partner who actually pays for
the items delivered in the sales order.
 The payer can also perform either the sold to
party, ship to party and bill to party functions
or all of them.

25.  Ship to party is the partner to whom the
delivery is done i.e. The delivery of the items
in the sales order is done at the ship to
party’s premises.
 The ship to party can also perform either the
sold to party, bill to party and payer
functions or all of them.

26.  In some countries a portion of the invoice
amount must be withheld for certain vendors
and paid or reported directly to the tax
authorities.
 SAP currently provides two functions for
calculating withholding tax:
- Classic withholding tax and,
- Extended withholding tax

27.  This indicator determines the special
procurement type of a material which is
either procured externally or produced in
house.
 The system determines the special
procurement key from the procurement type
and special procurement fields in the material
master record(Detail screen: MRP 1) and
display the value if the BOM is only allocated
to the plant.

28.  A work centre is a place where a certain
operation is performed in a plant.
 In Discrete manufacturing, in a process
industry, a work centre can be a machine or a
group of machines, employees or a group of
employees .
 In Repetitive manufacturing it is typically a
production line or a group of lines.

29.  An operation in SAP PP is a type of routing
that comprises a series of operations that
recur frequently.
 It is used to create routings.
 The standard values/activities such as set up
time or duration or machine time , etc are
assigned to operations in discrete
manufacturing.
 For example , casting of machine, post
casting inspection, filling machine and
packaging.

30.  It is a different combination of materials
combined together to form one single object.
It consist of a combination of materials by
having a structure like header and sub-
items.The complete combination of materials
only called as BOM item.
 In the BOM pricing, delivery can be carried
out at header level item(above structure) or
sub item level (below structure).
 Above structure is designated by item
category ERLA and below structure by item
category NORM.

31.  Recipes are unique to process manufacturing
(PPPI).It includes the steps to be executed and
resources required for the production of a
finished good.
 A production version is used in the creation
of a master recipe so as to identify the BOM
for the material and pull the bill of materials
details in the recipe.
 The master recipe is also determined by:
- Operations and Phases and,
- Resources and Work centres.

32.  It is the configuration object that determines
which alternative BOM is used together with
which Master Recipe to produce a material.
 For one material several production versions
frequently exist for various validity periods
and lot size ranges.
 Production versions is used in both discrete
manufacturing and process manufacturing.

33.  COGI is a transaction code which is used to
clear the goods movements that has been
recorded as errors.
 Examples of COGI:
- When there is a Lock entry in the table.
- When there is insufficient stock for the
issue material.
- If the master data is not setup correctly (
Missing storage location)
 The COGI needs to be periodically cleared.

34.  Make to stock production is when you produce
according to a periodic forecasted demand and
sell the product to any incoming customer who
wants to buy them.For example Mass Clothing
and steel production.
 It is determined by planned independent
requirements. It can be derived/copied from
Sales and Operations Planning(SOP) systems
which contains demands from previous periodic
sales.
 Each material produced to stock should have a
strategy that is made to stock strategy=10 , set
in the Material Master MRP 3 view, strategy group
field.

35.  This is also referred to as the Pull strategy
(make to order).It is when you specially
produce and deliver a product for a
customer’s order. For example production of
Haute couture and designed jewellery.
 Every material that is produced should have a
strategy that is made to order strategy= 20 ,
set in the Material Master MRP 3 view,
strategy group field.
 You can also set the individual and collective
indicator in the MRP 4 view to= 1, individual
requirement.

36.  Material Requirement Planning (SAP MRP) is a
tool which helps in planning the requirement
quantities and schedules of a given
material. It not only ensures availability of the
material for which MRP is carried out, but also
ensures availability of the components (of all
the BOM levels) below in the BOM structure.
 MRP uses real time manufacturing data to
generate automated supply orders and
maintain accurate product shipping
schedules.
 MRP systems contain embedded work process
and procedure documentation to help
employees perform day-to-day tasks.

37.  Picking is the physical activity of moving
goods from the warehouse for further
processing.
 It is part of the outbound delivery process
Sales and Distribution and is carried out
with Packing and Loading.
 The transaction code for picking is LT03.

38.  PIR stands for Purchasing information Record and
it is source of information on the procurement of
a specific material from a specific vendor.
 The purchasing information record allows
additional information to be held on a certain
material that is purchased from a certain vendor
 The information held in the Vendor Master allows
the specification of parameters, such as terms of
payment, that refer to the agreement between
the vendor and the purchasing organization.

39.  Activity types are used to describe the various
forms of activity that are performed at a cost
center.
 Activity types are valuated for each cost center
and period with a charge rate that consists of a
fixed portion and a variable (work-related)
portion. Thus the costs incurred at a cost center
can be distributed to products, according to
which activities have been performed.
 Activity types are closely linked to cost centre,
work centres and routings.
 Typical examples of activity types for cost
centers are machine hours, administrator hours,
CPU minutes or units produced.

40.  The purpose of cost rollup is to include the cost of goods
manufactured of all the materials in a multilevel
production structure within the costs of the material
located at the top of the structure.
 The costs are rolled up automatically using the costing
levels.
 The system first calculates the costs for the materials with
the lowest costing level and assigns them to cost
components. The materials in the next highest costing
level (such as semifinished materials) are then costed. The
costs for the materials costed first are rolled up and
become part of the costs of goods sold in the next highest
level
 This process is continued until the costing results of the
highest material in the structure (such as the finished
product) contain the cost of goods manufactured for every
material in the structure

41. Please don’t clap