ERP vendor master records

Vendor Master Data & Records,
and
Purchasing Information Data
EGN 5620 Enterprise Systems Configuration
Spring, 2012

and
Theories & Concepts

Supply Chain Management
in a Manufacturing Plant
Receiving
and
Inspection
Raw
Materials,
Parts, and
In-process
Ware-
Housing
Production
Finished
Goods
Ware-
housing
Inspection,
Packaging,
And
Shipping
Suppliers
Customers
Materials Management
Purchasing
Production
Control
Warehousing and
Inventory Control
Shipping
and Traffic
Physical materials flow
Information flow

Purchasing Process
Material Requisition
Request for Quotations
Select Best Supplier
Purchase Order
Receive and Inspect Goods
From purchasing,
to potential suppliers
From any department,
to purchasing
Based on quality, price,
lead time, dependability
From purchasing,
to selected supplier
From supplier, to receiving,
quality control, warehouse

Mission of Purchasing
Organization
 It develops purchasing plans for each
major product or service that are
consistent with operations strategies:
◦ Lower production costs
◦ Faster and on-time deliveries
◦ Higher quality products and services
◦ Flexibility

Purchasing Management
 Maintain data base of available, qualified
suppliers
 Qualify and select suppliers to supply
each material
 Negotiate contracts with suppliers
 Act as interface between company and
suppliers
 Provide training to suppliers on latest
technologies

Purchasing
Factors contributing to the importance of
purchasing today:
◦ Focus on core business
 Up to 60-70% of each sales dollar is paid to
material suppliers
 Great impact of material costs on profit
◦ Popular use of just-in-time concept
 Supply deliveries must be exact in timing,
quantity, and quality
◦ Globalization
 Geographically “stretched-out” supply chain
◦ Intensified competition for scarce resources

Justifications for Centralized
Purchasing
 Buying in large quantities
 better prices
 More clout with suppliers
 greater supply continuity
 Larger purchasing department
 buyer specialization
 Combining small orders
 less order cost duplication
 Combining shipments
 lower transportation costs
 Better overall control

Buyers’ Duties
 Know the market for their commodities
 Understand the laws.... tax, contract,
patent..…
 Process purchase requisitions and
quotation requests
 Make supplier selections
 Negotiate prices and conditions of sale
 Place and follow-up on purchase orders
 Maintain ethical behavior

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© SAP AG - University Alliances and
The Rushmore Group, LLC 2008. All
rights reserved. 10
Types of 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)

A paradigm shift in purchasing
practice
 1970 and before
◦ Open bidding
◦ Select the lowest price
 1980
◦ Open bidding
◦ Select the best value
 1990
◦ Solicit bids from qualified vendors
◦ Select the best value
 2000 & beyond
◦ Build/grow long term partnership
 Improve supplier’s product/process quality and delivery
commitment
 Share profit/price
◦ Form supply chains

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Trend in Buyer/Supplier Relationships
 Traditional purchasing process tends to
◦ Create an environment of mistrust and low
bidder mentality,
◦ Leading to higher total purchasing costs
 Trend is
◦ Collaborative partnership
◦ To establish long term product/service supply
contact agreements
◦ Via identifying, qualifying, and cultivating
longer term suppliers/partners

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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
 Improve overall quality
 Improve delivery performance

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Process for building a supply base
1. Identify need for long term supplier
contract (agreement)
2. Determine specific sourcing requirements
3. Identify potential suppliers
4. Determine method of evaluating suppliers
5. Select supplier for contract (agreement)
6. Negotiate and execute contract
(agreement)

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Supplier Evaluation and Selection
 A critical step is to identify and evaluate
potential suppliers
 It usually involves supplier development
aiming to
◦ Develop partnership with good (product quality) suppliers
◦ Improve total cost and delivery performance of purchased
materials and services
 Qualification process includes
◦ Vendor’s qualification
◦ Vendor’s product/service qualification (vendor sub-range)

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Outline Agreement
 Long-term purchase agreements
 Can be divided into the types below:
◦ Contracts
◦ Scheduling agreements
 Can be subject to a release (approval or
clearance) procedure

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Contract Management
 Track supplier performance using metrics
for
◦ On-time delivery
◦ Material and/or service quality
◦ Returned materials
◦ Expedite issues
◦ Pricing analysis
 Resolve problems
 Engage in continuous improvement
process
 Terminate/renew contract agreement

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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?

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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.

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Contract types
 Quantity contract
◦ Agreement 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 contract
◦ 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)

Vendor Master Data & Records, and
SAP Implementation

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Vendor Master Data
 Includes all data required for
◦ processing business transactions and
◦ corresponding with vendors
 Information is shared between the
◦ accounting and
◦ purchasing departments

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and Purchasing Information Data
 Vendor master data and records are
maintained by both
◦ accounts payable (A/P) and
◦ purchasing
 Purchasing information data are
maintained primarily by
◦ purchasing

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Vendor Master Data
 A master record must be created for
every vendor
◦ General data,
◦ Company Code data (Financial Accounting -
FI), and
◦ Purchasing data (Material Management - MM)
Purchasing data
Condition
Control data
Partner functions
Company code data
Account management
Payment
transactions
General data
Address
Control data
Payment
transactions

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Vendor Master Data Structure
Vendor 10001
General Data
Company Code Data
Financial Accounting (FI)
Purchasing Data (MM)

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Vendor Master Data – Typical
Screen
Vendor attributes that sufficiently
differentiate them by their:
 Address
 Control
 Payment Transactions
 Accounting Information
 Correspondence
 Purchasing Data
 Partner Functions

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General Data – Address
Address
Vendor Name
Search Term
Street address
City, Region Postal code
Country
Communication
Language
Telephone, Fax, E-Mail
Vendor Master
General Data – Address

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Vendor Master- General Data –
Control Data
 Account Control
• Customer (if the vendor is both a vendor and a
customer)
• Authorization
• Trading partner (if the vendor is a part of an
independent company)
• Group key (combines vendors to enhance the
search capacity)

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Vendor Master- General Data –
Control Data
 Tax Information
◦ Tax codes
 used to enter ID number of the vendor
◦ Fiscal address
◦ Country code
◦ City code
 Reference Data / Area
◦ International locator number
 used to identify a legal, functional, or physical
location within a business or organizational entity
◦ Industry key
 allows similar vendors to be grouped by industry
◦ Transport zone

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Vendor Master - General Data –
Payment Transactions
 Bank Details
◦ Bank Key
 selected from a match code with company code entered
◦ Bank Account
◦ Account Holder
◦ Partner Bank Type (if vendor has more than one bank
account, then it allows to sequence those accounts)
 Payment Transactions
◦ Alternative Payee
 used to enter another vendor number
◦ Instruction Key
 To control which statements are given to the banks during the
payment order

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Vendor Master – Accounting
Information
 Accounting Information
◦ Reconciliation Account
 see next slide
◦ Sort Key
 used to select a sort for the allocation field
◦ Release Group
 the release-approval group can be defined and
configured to allow only those in the group to be
able to “release for payment

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Reconciliation Account
 An individual G/L account recorded in line-item
detail in the sub-ledger and summarized in the
G/L
 The information entered into the reconciliation
account is all line-item data from the vendor
account.
 The reconciliation in the G/L is at the summary
level and is used to reconcile against the vendor
account at the total level, while the sub-ledger
identifies line-item data.

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Reconciliation Account
 Postings to sub-ledgers (such as accounts
receivable or accounts payable) are
automatically concurrently posted to the
corresponding reconciliation account in the
General Ledger
 Thus, the General Ledger is automatically
updated and remains in balance with the
customer and vendor individual account totals

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Subsidiary
Ledger Accounts
A/R, A/P, GR/IR
General Ledger
Reconciliation Accounts
A/R, A/P, GR/IR
General Ledger
Reconciliation Account (continued)
Debit Credit
Debit Credit
A/P
Debit Credit
A/R
Debit Credit
GR/IR
$$ $$
$$ $$
$$ $$
$$ $$
General
Ledger

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Vendor Master – Accounting
Information
 Interest Calculation
◦ Interest Calculation Indication
 for automation interest calculation, and is
configured by accounting department
◦ Interest Calculation Frequency
 used to select a period for calculation of interest
 Withholding Tax
◦ Withholding Tax Code
◦ Exemption Number

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Account Groups
 Identifier that controls which fields must
be entered when an account is created
 Determine a valid number interval for
each of the groups (types) of General
Ledger accounts that have common
attributes
 Must be created before General Ledger
Chart of Accounts master records can be
created
 You must assign each account to an
appropriate account group

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© SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights
reserved. 37
Account Groups
Chrt/accts Acct group Description From To
CHRT BS Balance Sheet (BS) 100000 399999
CHRT PL Income Sheet 400000 999999
CHRT RA Reconciliation 110000 310000

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Account control Suppress Req. entry Opt. entry Display
Currency
Tax category
Reconciliation account
…
Account Group BS
Account control
Account management
Document entry
Bank/financial details
Interest calculation
Joint venture
Account Groups

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Field Status
 Field status controls how the data will be
entered for a field when an accounting
master record is being used in a
transaction
 Determining whether a field is required,
optional, suppressed, or display only
 Field status controls are also relevant to a
specific activity — create, change, or
display

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Field Status Variant
Fld status groupText
ZALL All Accounts
ZBSA Balance Sheet Accounts
ZEXP Expense Accounts
ZGRI Material Management (GR/IR) Accounts
ZRCN Reconciliation Accounts
ZREV Revenue Accounts

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Field status variant (V000) - Group ZBSA - Balance Sheet Acct.
General data
Additional account assignments
Materials management
Payment transactions
Asset accounting
Taxes
...
General Data Suppress Req. entry Opt. entry Display
Assignment number
Text
Invoice reference
…
Field Status Variant

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Vendor Master – Payment Transactions
 Payment Data
◦ Payment Terms (cash discounts and favorable payment
periods offered by vendor)
◦ Tolerance Group (the limit to which an event can deviate)
◦ Check Double Invoice (to check for double or duplicate
invoices when they are entered)
◦ Check Cashing Time
 Automatic Payment Transactions
◦ Payment Methods
◦ Alternate Payee
◦ Payment Block(prevent any open items from being paid)
 Invoice Verification
◦ Tolerance Group

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Vendor Master –
Correspondence Accounting
 Dunning Data
◦ Dunning Procedure
 To remind vendors to deliver the material from the purchase orders
◦ Dunning Block
 If selected, the vendor is not for dunning run
◦ Dunning Recipient
◦ Date of Legal Dunning Procedure
 Correspondence information
◦ Local Processing
◦ Accounting Clerk
◦ Account With Vendor
 used to identify the company
◦ Clerk at vendor
 the contact person at the vendor side

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Vendor Master –Purchasing Data
 Conditions
◦ Order Currency
◦ Terms of Payment
◦ Incoterms (next slide)
◦ Minimum Order Value
 Sales Data
◦ Salesperson
◦ Telephone
◦ Account with vendor

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Incoterms
are standard trade definitions used in international
contracts. The International Chamber of Commerce based
in Paris, devised these standard trade definitions. The 13
incoterms are divided into four groups (arrival, departure,
carriage paid by seller, and carriage not paid by seller).
Group Incoterm Long Name Location
E-Departure EXW Ex work Named Place
D - Arrival DAF Delivered at Frontier Named Place
D - Arrival DES Delivered Ex Ship Port of Destination
D - Arrival DEQ Delivered Ex Quay Port of Destination
D - Arrival DDU Delivered Duty Unpaid Destination
D - Arrival DDP Delivered Duty Paid Destination
C- Paid CFR Cost and Freight Port of Destination
C- Paid CIF Cost, Insurance, Freight Port of Destination
C- Paid CPT Carriage Paid to Destination
C- Paid CIP Carriage, Insurance Paid Destination
F - Unpaid FCA Free Carrier Named Place
F - Unpaid FAS Free Alongside Ship Port of Destination
F - Unpaid FOB Free on Board Port of Destination

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• Control Data
• Acknowledgement Required
• To indicate if acknowledgement is required upon receipt of the order
• Automatic Purchase Order
• To allow automatic issuance of purchase order
• Good receipt-based invoice verification
• To perform invoice verification based on the goods receipt amounts
• Subsequent settlement
• To allow a rebate
• Default Data Material
• Purchasing Group
• Planned Delivery Time
• Confirmation control (confirmation type and sequence)

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Vendor Master – Purchasing Data –
Partner Functions
 Partner Functions
◦ Used to define the relationships between the
vendor (or customer) and the company.
 List of (Vendor) Partner Functions
◦ AZ alternative payment recipient
◦ CA contract address
◦ CP contact person
◦ ER employee responsible
◦ GS goods supplier
◦ OA ordering address
◦ PI invoice presented by
◦ VN vendor

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Vendor Master – Purchasing Data
– Account Group
 Vendor masters are assigned to a vendor
account group
 Through field status maintenance, vendor
account groups can be set up for one-time
vendors, regional vendors, and internal
vendors
 The vendor account group controls both
type and number range assignment for
vendors

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Purchasing Info Record
 The purchasing info record provides
continuously updated information about
◦ the relationship of a specific material with a
specific vendor
◦ Order unit, price, price changes, tolerances,
reminder information, historic data, statistics,
texts
◦ Choice of automatic or manual updating

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Source List
 It stores information about where to
acquire a given material for a given period
of time
 It specifies whether this source should be
used by Materials Requirement Planning
(MRP)

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Purchasing Tolerances
 A tolerance limit set for allowed variance
before a warning/error message is
displayed
◦ Price variance
 Compares the price in the purchase order with the
valuation price stored in the material master
◦ Maximum cash discount
 This tolerance limit is set to assure that cash
discounts do not exceed allowable discounts

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Goods Receipts Tolerances
 Purchase order price quantity
◦ Two tolerance levels maintained per item
 The maximum percentage variance before a goods
receipt postings is not allowed
 A percent variance that generates a warning
message but allows posting
 Moving average price variance
◦ the maximum moving average price change
allowed

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Invoice Receipts Tolerances
 Tolerance limits configured for invoice
receipts: price, quantity, and blanket
purchase orders
 The tolerances include:
◦ Amount for item with or without order
reference
◦ Percentage Over/Under Quantity Variance
◦ Exceed amount: quantity variance
◦ Blanket purchase order (value and time limit)
◦ Price variance

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Automatic Account Assignment
 Created to avoid manual postings of
financial transactions which follow goods
movements to reflect the values of
transferred materials
 Used across all modules to keep track of
the values of materials that are being
consumed (e.g., production), or transferred
into other valuation areas of the company
 Is a set of rules and master data which
enable the financial tracking of logistics
movement

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Components
 Chart of Accounts
 Valuation Grouping Code
◦ Example: valuation area is plant, five plants
exist in the company, all five plants use the
same accounts.
◦ Multiple valuation groups are possible
 Transaction Key
 Modifier for Transaction Key
 Valuation Class

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Valuation Grouping Code
Plant – P004
Plant – P001
Grouping Code
G001
Plant – P003
Plant – P002
Grouping Code
G002
Plant – P005

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Transaction Keys
 Transaction Keys
◦ The transaction keys are used to determine
accounts or posting keys for line items which
are created automatically by the system.
◦ The transaction keys are defined in the
system.

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Transaction Keys
 Transaction Keys
◦ Inventory Postings
 BSX
◦ Offsetting Entry for Inventory Postings
 GBB
◦ Materials Management Small Differences
 DIF
◦ Cost (price) differences (PPV)
 PRD
◦ Goods receipt / inv. receipt clearing acct
 WRX

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Modifier
 Modifier – modifies the transaction key for
various movement types
◦ Blank – Goods receipt from purchase order
with account assignment
◦ VBR – Goods issue to consumption
◦ VAX – Goods issue to sales – post to cost of
goods sold
◦ AUF – Goods receipt from a production order
– post to production settlement
◦ Etc. – Many others

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Material Types & Valuation Classes
 Account category reference:
◦ Builds the link between material types and the
valuation class(es)
0009 – Reference for Finished Products
0005 – Reference for Trading Goods
0002 – Reference for Operating Supplies
0001 – Reference for Raw Materials
Account Category Reference
FERT
HAWA
HIBE
ROH
Material Type
7920
3100
3030/3031
3000/3001/3002/3003
Valuation Class

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Material Types & Valuation Classes
Material Type
ROH (Raw Material)
Acct Cat. Ref
0001 – Raw Materials
Valuation Class
3100
(Trading Goods)
Valuation Class
3000
(Raw)
Valuation Class
7920
(Finished goods)
Valuation Class
3030
(Supplies)

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Account
7210_ _
Plant
P_
_
_
Valuation Class
3100 (Trading Good)
Grouping Code
G_ _ _
Goods Movement
GBB (Goods issue)
Account Modifier
Blank (Goods receipt)
Valuation Class
3030 (Supplies Good)
Grouping Code
G_ _ _
Goods Movement
GBB (Goods issue)
Account Modifier
Blank (Goods receipt.)
Account
7400_ _

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Plant
Material Type
Points To:
G/L Account
Account
Modifier
Transaction
Event Key
Valuation
Grouping Code
Valuation
Class
Represented
By:
Chart of
Accounts
Additional
Information
Goods
Movement
Valuation Area
Material
Where Value
is recorded:
Why 2:
Why 1:
Where Valued:
What:
Plant – P_ _ _
HAWA
Points To:
7210 _ _
Blank
GBB
G_ _ _
3100
Represented
By:
Chart of
Accounts -
C000
From
purchase
order
Good
Receipt
Plant – P_ _ _
BPEN_ _ _
Where Value
is recorded:
Why 2:
Why 1:
Where Valued:
What:

Vendor Master Data & Records, &
Purchase Information Records
PEN, Inc.

Pen Inc. : Supplies
Vendor Name Vendor Code City State
Zip
code
Promotions Ltd _ _ _ Chico CA 95929
Slick Pens _ _ _ Milwaukee WI 53201
Premier Pens _ _ _ Baton Rouge LA 70803
Boxes inc _ _ _ Sioux Falls SD 57101
Tanager Vermillion SD 57069

Pen Inc. : Purchase
Information Records

Exercises:
89. Set default values for inventory management reservations
90. Maintain purchasing tolerance limits
91. Maintain goods receipt tolerance limits
92. Maintain invoice receipt tolerance limits
93. Set (review) valuation control
94. Assign valuation area grouping
95. Define (review) valuation classes
208. Create labor expense account
209. Create production order settlement account
210. Create production variance account
96. Configure automatic postings for goods movement
97. Configure automatic posting for taxes
98. Set parameters for invoice verification
99. Create default values for invoice verification
173. Create purchasing information records
173a.Create source list

ERP vendor master records

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