The document provides an overview of SAP MM (Materials Management) module and the procurement process in SAP. It discusses: 1) The objectives of the workshop which are to describe the procurement cycle, master data, integration points, and reporting tools. 2) An overview of the MM module which focuses on inventory, purchasing, and warehouse management. 3) The key steps in the procurement process including purchase requisition, order, goods receipt, invoice verification, and payment. 4) The relevant master data including material and vendor masters. 5) Reporting and analysis tools available for procurement including standard reports by vendor, material, and purchase order.

1. SAP MM /WM - Overview
Dilip Sadh

2.  Describe the basic business process of Procuring Materials
and Services in the SAP R/3 System.
 Discuss the integration points in procurement to Financial
Accounting and Inventory management.
 Discuss the reporting and analysis tools used in the
procurement cycle.
 Discuss the Company’s procurement process.
 Communicate scope expectations.
Procurement Cycle Workshop - Objectives

3. SAP
CO
AM
PS
WF
IS
MM
SD
PM
PP
QM
FI
HR
Finance
Human
Resources
Global tools
Logistics
QM : Quality Management
PM : Plant Maintenance
WF : Workflow
IS : Industry Solutions
SD : Sales & Distribution
MM: Material Management
WM : Warehouse Management
PP : Production Planning
FI : Financial Accounting
FI-AM : Assets Management
CO : Controlling
PS : Project System
SAP modules
Modules in PROJECT
MM module

4. MM is a component of Logistics in SAP that focuses on
inventory management, warehouse management, vendors and
purchases.
SAP
CO
AM
PS
WF
IS
MM
SD
PM
PP
QM
FI
HR
MM Materials Management

5. Inventory management
MM overview
Material planning
Production
Internal procurement
Purchasing
External procurement
Invoice
verification
Goods receipts
Goods issue
Stock transfers
Invoice entry
Storage areas
management
Financial accounting Sales
MM
MASTER
DATA
•Materials
•Batches
•Vendors
•Purchasing
info record
•Source list

6. Agenda
Attendees:
 Business Managers, Process Owners
Topics:
 Master Data
 Procurement Process Overview
 Reporting
Procurement Cycle Workshop

7. Organizational and Master Data
Business Process for
Procurement
Reporting and Analysis
Procurement

8. The primary SAP R/3
application modules that
support the Procurement
process include:
 Materials Management
 Purchasing
 Goods Receipts
 Invoice verification
 Financial Accounting
 Payment processing
 Materials Valuation
R/3
Client / Server
ABAP/4
FI
Financial
Accounting
CO
Controlling
AM
Fixed Assets
Manage-
ment
PS
Project
System
WF
Workflow
IS
Industry
Solutions
MM
Materials
Manage-
ment
HR
Human
Resources
SD
Sales &
Distribution
PP
Production
Planning
QM
Quality
Manage-
ment PM
Plant Main-
tenance
Procurement

9. The SAP R/3 Procurement business process uses
the following R/3 organizational elements:
Storage Location
Purchasing Organization Purchasing Group
Company Code
COMPANY CODE
Plant
Organizational Elements

10. The following master data is used in the Procurement cycle:
 Material Master
 Vendor Master
Master Data

11.  The material master record contains all data required to
define and manage material. It integrates data from
manufacturing, sales and distribution, purchasing,
accounting and other departments.
 The material master is used as a source of data for purchase
order processing throughout the procurement cycle.
Master Data: Material Master

12. Material Master Primary Views
Purchasing
Sales
Work
scheduling
Stocks in plant/
storage location
Accounting
Engineering/
Design
MRP
A
B
St
t
Material
Master
Storage

13. Client
Plant
Storage Location
General data
Material number
Description
Units of measure
Plant-specific data
Planning data
Manufacturing data
Purchasing data
Valuation data
Storage location-
specific data
Stock quantities
Material number
Description
Units of measure
General data
Storage Location
specific data
Stock quantities
Material Master Organizational Levels

14.  The vendor master includes all data necessary for processing
business transactions and corresponding with vendors.
 Information is shared between the accounting and purchasing
departments.
 Data is grouped into three categories.
• General data
• Accounting data
• Purchasing data
Master Data: Vendor Master

15. Organizational and Master Data
Business Process for
Procurement
Reporting and Analysis
Procurement

16. Requirements
Determination
Order Follow-upInventory Management
1.
Vendor Selection
RUHR
TRUCKING
3.
Order Processing4.5.
Goods Receipt and6.
Invoice Verification
Purchase Order
7.
8. Source
Determination
2.Payment
Vendor
invoice
?
Procurement Environment

17. Invoice
Processing
Goods
Receipt
Purchase
Order
Purchase
Requisition
for Goods/
Services
Purchase
Requisition
10
20
30
Purchase
Order
10
20
30
Planning, Reporting, and Analysis
Vendor
invoice
The Procurement Process

18. Purchase Requisition
 Request or instruction to the purchasing department to procure a
certain quantity of a material or service on or by a certain date.
 Are created directly by a requesting department or automatically via
material requirements planning (MRP).
 Are internal documents not used outside the company.
Purchase Requisitions:
Invoice
Processing
Goods
Receipt
Purchase
Order
Purchase
Requisition
for Goods/
Services
Purchase
Requisition
10
20
30
Purchase
Order
10
20
30
Planning, Reporting, and Analysis
Vendor
invoice

19. MRP
Purchase requisition Release strategy
Purchase
Order
Determine source of supply
Direct Entry
Purchase Requisition Processing

20. Purchase Order
 Represent the formal approval of a purchasing transaction with a vendor.
 Identify the following items such as:
 Vendor
 Material and quantity ordered
 Price and terms
 Delivery date and location
Purchase orders:
The Procurement Process
Invoice
Processing
Goods
Receipt
Purchase
Order
Purchase
Requisition
for Goods/
Services
Purchase
Requisition
10
20
30
Purchase
Order
10
20
30
Planning, Reporting, and Analysis
Vendor
invoice

21. Service
Consumable Material
Stock Material
Account Assignment
(cost center, asset,
internal order)
Statistics Order
History
Purchase
Order
• Standard
Purchase
Requisition
Direct Entry
or Purchase
Requisition
Purchase Order Processing

22. Processing Purchase Orders
Purchase
requisition
Reference
document
Contract
Vendor
One-time vendor
Purchase
order
10
20
30

23. Goods Receipt
 Verifying the receipt against the order.
 Valuating material at purchase order price.
 Creating material and accounting documents to record the event.
 Updating the purchase order history.
 Providing basis for invoice verification (2nd part of 3-way match).
Goods receipts record the inward movement of goods or materials by:
The Procurement Process
Invoice
Processing
Goods
Receipt
Purchase
Order
Purchase
Requisition
for Goods/
Services
Purchase
Requisition
10
20
30
Purchase
Order
10
20
30
Planning, Reporting, and Analysis
Vendor
invoice

24. Goods
Receipt
Vendor
RUHR
TRUCKING
Purchasing
Documents
Items
1.
2.
3.
RUHR
TRUCKING
Warehouse/Stores
Entering the goods receipt increases the inventory
level of a material that is procured for stock.
Goods Receipt for Stock Material

25. Consumption Statistics
Purchasing Data:
Order item
Order history
Goods
Receipt
Posting
G/L Accounts:
Stock Account
Consumption Account
GR/IR Account
Accounting Document
Stock Quantity
Point of Consumption
Cost center
Order
Material
Document
Goods Receipt
Slip
Results of a Goods Receipt Posting

26. Material Movements Through IM and WM
 Material Movements Flow:
 Transfer Requirement (TR)
 Transfer Order (TO)
 Confirm Transfer Order

27. Invoice Processing (1)
 Matches the vendor’s invoice to the purchase order and the
goods received (3rd part of 3-way match).
 Matches price, and quantity.
 Updates the purchase order and its history.
 Updates accounting information.
Invoice verification:
The Procurement Process
Invoice
Processing
Goods
Receipt
Purchase
Order
Purchase
Requisition
for Goods/
Services
Purchase
Requisition
10
20
30
Purchase
Order
10
20
30
Planning, Reporting, and Analysis
Vendor
invoice

28. Invoice Verification Environment
G/L accounts:
Purchase
Order
Goods Receipt
Vendor
Invoice
Invoice
Verification
Invoice verification accesses data from purchasing, inventory
management, material master, and vendor master files.
Material Master
Vendor Master
Conditions
G/L Accounts
Assets
Cost Centers
Projects
Orders
Posting an invoice in the SAP System
updates purchasing and accounting data
Vendor
Invoice
?

29. Invoice Processing (2)
 Selects invoices for payment based on the payment terms in
the vendor master or purchase order.
 Generates payment for released invoices.
 Updates accounting information.
Invoice Payment:
The Procurement Process
Invoice
Processing
Goods
Receipt
Purchase
Order
Purchase
Requisition
for Goods/
Services
Purchase
Requisition
10
20
30
Purchase
Order
10
20
30
Planning, Reporting, and Analysis
Vendor
invoice

30. Financial
Accounting
Vendor
1000 Payment
program
Bank
1000
Motor Sports International
Released
invoice
Vendor Payment

31. PP FI FI
Purchase Requisitions
Goods Receipt
Invoice Verification
Purchase
requisition
Released
invoice
?
Procurement Integration

32. Organizational and Master Data
Business Process for
Procurement
Reporting and Analysis
Procurement

33.  Standard Reporting provides List Displays by:
 Vendor
 Material
 Account assignment
 Material Group
 Purchase order number
 General Analysis
 Order Value Analysis
 Inventory Transaction Analyses
Reporting and Analysis

34. Logistics Information Library
Logistics
Processing
Systems
Logistics
Information
Systems
R/3
Sales and
Distribution
(SD)
Materials
Management
(MM)
Production
Planning
(PP)
Shop Floor
Information
System
Inventory
Controlling
Purchasing
Information
System
Sales
Information
System
Logistics Information System

35. Thank you for your kind attention!
Dilip Sadh