Unit 13Materials Management (MM)                - Transactions -
Business Process Integration                                 MM                   © SAP AG - University Alliances and TheJ...
Transaction Data• Includes internal and external exchanges that  describe business activities• Unlike master data, aggrega...
Materials Management (MM)                                     SD                                FI                        ...
Unit 13 – Overview• A company may want to establish a long term  purchasing relationship with a vendor• Its is accomplishe...
Buyer/Supplier Relationships• Antagonistic – parties view each other as the  enemy (lose/lose)• Adversarial – each party a...
Buyer/Supplier Relationships• Long term partnerships are the objective of  the supplier evaluation and selection process  ...
Supplier Evaluation and Selection•    Identify need for long term supplier contract•    Determine specific sourcing requir...
Benefits of Managing the                     Supply Base• Contract with only world-class suppliers• The fewer suppliers th...
Outline Agreement• Long-term purchase agreements• Outline agreements can be subdivided into  the following types:      – C...
Contract Process Overview• Step one is to identify and evaluate suppliers• It may involve supplier development• The goals ...
Contracting Questions• How will potential suppliers be evaluated and  selected?• What procedures will be required to manag...
Contract Management• Supplier performance metrics      – On-time delivery      – Material and/or service quality      – Re...
Creating a Contract• Is a long-term agreement with a vendor to  provide a material or service      – For an agreed upon pe...
Two Types of Contracts• Quantity contracts are agreements with a  particular vendor to purchase a specific  quantity of ma...
Quotations/Contracts Process• Requirement for material is identified• Process followed to select a vendor      – Request f...
Request for Quotation (RFQ)• Is an invitation to a vendor to indicate their  terms and conditions (in particular, their pr...
Quotation• A quotation contains the vendors pricing and  conditions for providing the material or  service stated in the R...
Maintaining a Quotation• Enter each vendors quotation in the  associated Request for Quotation (RFQ)• Compare prices using...
Comparison of Prices• You can compare the prices from all  quotations from the competitive bidding  process using the pric...
Creating a Release Order• Purchase order that references a contract is  called a release orders, they specify:      – Numb...
Creating a Release Order                      (continued)• The vendor data, price data, and the delivery  terms and condit...
Unit 13 – Exercises               107. Create Purchase Outline Agreement (Contract) for                    Stock Items    ...
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MELJUN CORTES Materials Management Transactions Part 2

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MELJUN CORTES Materials Management Transactions Part 2

  1. 1. Unit 13Materials Management (MM) - Transactions -
  2. 2. Business Process Integration MM © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 2 reserved.
  3. 3. Transaction Data• Includes internal and external exchanges that describe business activities• Unlike master data, aggregate transactional data is dynamic – each transaction is unique © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 3 reserved.
  4. 4. Materials Management (MM) SD FI Sales and Financial Distribution Accounting MM CO Materials Controlling SM PP Mgmt. Production Planning R/3 AM Fixed Assets Mgmt. EC Service Client / Server Enterprise Mgmt. Controlling QM Integrated Business PS Quality Project Mgmt. PM Solution WF System Plant Maintenance Workflow HR IS Human Industry Resources Solutions © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 4 reserved.
  5. 5. Unit 13 – 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 5 reserved.
  6. 6. Buyer/Supplier Relationships• 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) © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 6 reserved.
  7. 7. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 7 reserved.
  8. 8. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 8 reserved.
  9. 9. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 9 reserved.
  10. 10. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 10 reserved.
  11. 11. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 11 reserved.
  12. 12. 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? © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 12 reserved.
  13. 13. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 13 reserved.
  14. 14. 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. © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 14 reserved.
  15. 15. 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)January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights 15 reserved.
  16. 16. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 16 reserved.
  17. 17. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 17 reserved.
  18. 18. Quotation• A quotation contains the vendors 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 vendors pricing and conditions in the original RFQ. © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 18 reserved.
  19. 19. Maintaining a Quotation• Enter each vendors 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 19 reserved.
  20. 20. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 20 reserved.
  21. 21. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 21 reserved.
  22. 22. 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 © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 22 reserved.
  23. 23. Unit 13 – Exercises 107. Create Purchase Outline Agreement (Contract) for Stock Items 108. Run Materials Requirements Planning – Single Item, Single Level 109. Convert Proposed Purchase Requisition to Release Order 110. Review Outline Agreements 111. Create Goods Receipt 112. Create Invoice Receipt from Vendor 113. Post Payment to Vendor © SAP AG - University Alliances and TheJanuary 2008 Rushmore Group, LLC 2008. All rights 23 reserved.

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