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Business Blue PrintBusiness Blue Print
MATERIALS MANAGEMENT
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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RGS MM TEAM
S.no RevisionCreated
Date
Last
modifiedRemarks
1. 1.0 26.06.2011 30.06.2011
.
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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BUSINESS BLUEPRINT DOCUMENT
MATERIAL MANAGEMENTMATERIAL MANAGEMENT
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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Version: 1.0
Date:
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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Document Information
Document Name Business Blue Print
Title PRP_ MM _BBP_Business Blueprint_ Material Management
Document Purpose Requirement gathering and Mapping to SAP
Key Words
Document Status
Contact for Enquiries
Document Change Control :
Release Description Created by DateReviewed
byDate
Approved
byDate
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ContentsContents
RGS MM TEAM………………………………………………………………………2
MATERIALMANAGEMENT.................................................................................... 3
EXECUTIVESUMMARY…………………………………………………………..4
ORGANIZATIONALSTRUCTURE.........................................................................8
REQUIREMENTS/EXPECTATIONS………………………………………………10
TO BE STRUCTURE…………………………………………………………………11
CHANGES TO EXISTING ORGANIZATION
PROCESSES………………………………………………………………………….11
PLANTS AND STORAGE LOCATIONS…………………………………………...11
PLANTS………………………………………………………………………………12
STORAGELOCATIONS……………………………………………………………..12
PURCHASINGORGANIZATIONS………………………………………………….13
PURCHASING ORGANIZATIONS FOR EMAMI
…………………………………...13
PURCHASINGGROUPS……………………………………………………………..14
MASTERDATA……………………………………………………………………..14
AS IS PROCESS…………………………………………………………………….14
DETAILS IN MATERIALS MASTER………………………………………………15
INDUSTRY SECTOR………………………………………………………………15
MATERIAL TYPE………………………………………………………………,,,,,,,15
MASTERIAL CODIFICATION…..…………………………………………………16
TRANSACTION CODE…………..…………………………………………………17
DESCRIPTION OF IMPROVEMENTS…………………………………………….17
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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VENDOR MASTER……………………………………………………………..…17
VENDOR GROUP………………………………………………………..…………18
PARTNER FUNCTIONS……………………………………………………………18
VENDOR.RECONCILIATION.ACCOUNTS………………………………………18
TRANSACTION CODE……………………………………….……………………19
DESCRIPTION OF IMPROVEMENTS
PURCHASE INFO RECORDS…………………….………………………………20
TRANSACTION CODE……………………….…………………………………….20
DESCRIPTION OF IMPROVEMENTS…………………….………………………20
SOURCE LIST………………………………………………………………………20
AS-IS……………………………………….…………………………………………21
TO-BE…………………………………………………………………………………21
TRANSACTION CODES
PROCUREMENT FLOW……………………………………………………………21
REQUIRED BUSINESS PROCESS FLOW DIAGRAM FOR EMAMIREQUIREMENTS/EXPECTATIONS FROM THE
PROCUREMENT………………………………………………………………………22
PURCHASE REQUISTIONS…………………………………………………………23
PURCHASE REQUISTION DOCUMENTS………………………….……………..…24
PROCUREMENTS TYPE……………………………………………………………24
PURCHASE REQUISTION NUMBERING…………………………………..….….24
ITEM NO.INPURCHASE REQUISTION………………………………..………….…25
PURCHASE REQUISTION RELEASE PROCEDURE………..……………………....25
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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ATTACHEMENTS IN PRDOCUMENT………………………………………….……25
RFQ……………………………………………………………..……………………..…26
QUOATATION………………………………………………………………………..…26
RFQ TYPE………………………………………………………………………………..26
PROCUREMENT TYPE………………………………………..……………………..…27
NUMBER RANGE…………………………………………………………………….…27
ATTACHEMENTS IN A RFQ DOCUMENT……………………..…………………..…27
IMPROVEMENTS
PURCHASE ORDER…………………………………..………………………………27
AS-IS………………………………………………………………………………….….27
TO-BE……………………………………………………………………………………28
PURCHASE ORDER…………………..…………………………………………….…28
PROCUREMENT TYPES………………………………………………………….…28
DESCRIPTION OF IMPROVEMENTS……………………………….……………..…28
OUTLINE AGREEMENT…………………………………………………………...28
CONTRACT…………………………………………………………………………....29
AS-IS………………………………………………………………………………….…29
TO-BE……………………………………………………………………………..….…29
NUMBER RANGES………………………….……………………………………..….29
RELEASE STRATEGIES……………………………………………………….……..29
SCHEDULING AGREEMENT……………..…………………….…………………..30
NUMBER RANGE………………………………………………………………………30
SERVICES PROCUREMENT……………….……………………………………….31
SPECIAL ORGANIZATIONAL CONSIDERATIONS…………………………...……31
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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TO-BE……………………………………………………………………………………31
NUMBER RANGE…………………………………………..……………………….…31
RELEASE STRATEGIES……………………………………………………………….31
INVENTORY MANAGEMENT………………………………………………………32
GOODS RECIEPT……………………………………………………………………..37
TYPE OF GR/MATERIAL DOCUMENT……………………………………………...37
NUMBER RANGE……………………………………………………………………...37
ACCOUNT MOVEMENT……………………………………………………..………..38
DESCRIPTION OF IMPROVEMENTS
GOODS ISSUE…………………………………………………………………………39
NUMBER RANGES…………………………………………………………………….40
ATTACHEMENTS IN A GI DOCUMENT…………………………………………….40
IM (GOODS RETURNS TO VENDOR)………………………………………………..41REQUREMENTS/EXPECTATIONS…………………………………………………..42
GENERAL EXPLANATIONS………………………………………………………….42
SPECIAL ORGANIZATIONAL CONSIDERATIONS………………………………...43
SOLUTION IN SAP …………………………………………………………………....43
STOCK TRANSFER (PLANT TO PLANT)…………………………………………44
TRANSFER POSTING (STORAGE LOCATION TO STORAGE LOCATION)-
TCODE:MB1B…………………………………………………………………….…….45
ONE STEP AND TWO STEP STOCK TRANSFER…………………………………...45
NUMBER RANGES…………………………………………………………..………...45
PHYSICAL INVENTORY VERIFICATION………………………………………..46
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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REQUIREMENTS/EXPECTATIONS………………………………………………….46
TO-BE STRUCTURE…………………………………………………………………...47
PHYSICAL INVENTORY PROCEDURES…………………………………………….47
PHYSICAL INVENTORY……………………………………………………………...48
CREATE A PHYSICAL INVENTORY DOCUMENT. (TCODE MI01)…….………..48
BLOCKING MATERIALS FOR POSTING …………………………………………...48
INVENTORY COUNT………………………………………………………………….49
ENTERING THE COUNT RESULTS IN THE SYSTEM (TCODE: MI04)…………...49
POSTING INVENTORY DIFFERENCES (TCODE: MI07)…………………….…..…49
Batch Management……………………………………………………………….…….50
As-Is Process…………………………………….………………………………………50
To-Be…………………………………………………………………………………….50
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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EXECUTIVE SUMMARY
SAP Implementation at EMAMI is being carried out using standard ASAP (Accelerated SAP)
methodology suggested by SAP for implementation.
The consultants from RGS Ltd. referred Q & A DB (Question & Answer Database) as suggested in
ASAP methodology for capturing the requirements from EMAMI process owners, core users and
core team members. A series of various meetings were conducted with EMAMI process owners,
core users and core team members to capture AS-IS process followed in EMAMI. After that SAP
orientation sessions were administered for the process owners, core users and core team members
of EMAMI to give them orientation towards the standard SAP process functionality.
Orientation sessions were followed by exhaustive and interactive business workshops with EMAMI
process owners, core users and core team members, in which RGS consultants demonstrated the
standard SAP process functionality cycles suitable for EMAMI group and got confirmation from
the process owners, core users and core team members regarding the “To- Be” processes to be
followed in EMAMI after SAP implementation. These proposed “To-Be” processes, capturedduring business workshops as well as meetings with EMAMI process owners, core users and core
team members, are consolidated in this business blueprint document.
This business blueprint is prepared based on the inputs given by EMAMI process owners, core
users and core team members till the date of submission of the business blueprint. Configuration of
SAP modules for the processes of EMAMI group will be done as mentioned in the business
blueprint. Any future changes in these processes documented and agreed upon as part of this
blueprint sign-off will be addressed strictly through Change Management Procedure as mutually
agreed in the Contract.
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ORGANIZATIONAL STRUCTURE
AS – IS SITUATION
EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457
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EMAMI COMESTICS
GROUP
KOLKATA
PLANT
oc1 Stloc3Sloc 1
PONDICHERRYPLANT
EMAMI MANCOMPANY
EMAMI MARK COMPANY
CHENNAIPLANT
MUMBAI
PLANT
Sloc2 Sloc1 Sloc2
Sloc3
Sloc 1
CEN PURCHOFFICE
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EMAMI Manufacturing Company consists of two plants located in KOLKATA and
PONDICHERRY which manufactures Cosmetic Products.
EMAMI marketing Company Consists of two Plants located at CHENNAI and MUMBAI Whichis responsible for Distribution across India.
The purchase department is the organization, which handles the acquiring of goods or services to
fulfill the goal of enterprise. It ensures that the materials or services are procured at the best
possible total cost of ownership to meet the needs of the purchaser in terms of quality, quantity,
time and location.
The structure provided above demonstrates the purchasing department of EMAMI. It consists of
one purchasing point responsible for procurement of all the materials in all the plants across the
two companies.
There are 3 storage locations in Kolkata plant and the Pondicherry plant which can store Raw
materials, Semi Finished and Finished Goods separately in each storage location. There is an
individual storage location for each plant (Chennai & Mumbai) under Marketing company
which stores Finished goods.
REQUIREMENTS/EXPECTATIONS
Material management organization structure should support:
Purchase of materials, Vendor Consignments and Services for the manufacturing units of EMAMI
at Kolkata and at PONDICHERRY
Purchase of administration related items.
Inter plant stock transfer orders.
Intra company stock transport orders
Inventory Management.
Subcontracting
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A EMAMI production line has two manufacturing plants at Kolkata and Pondicherry where the
Manufacturing of Cosmetic products is made. All the Plants has a common procurement division.
TO-BE STRUCTURE
SL01 SL02 SL03 SL01 SL02 SL03 SL01 SL01
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PL01
Plant
RM01 FG01FG01
PL02Plant
EM01Company Code EM02Company Code
PL03Plant
PL04
Plant
SF01RM01 SF01
FG01
FG01
CP01
Purchasing
Org
EMAMI COMESTICS
GROUP
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EXISTING ORGANIZATION PROCESSES
• One purchasing organizations is responsible for entire purchasing activities.
• Three purchase groups are there to monitor separately the purchase of materials in place
of purchase team.
• 3 storage locations are there for each plant under manufacturing company and 1 storage
location for each plant under Marketing Company which helps in proper tracking and
monitoring of stocks.
PLANTS AND STORAGE LOCATIONS
A plant is an organizational unit within Logistics, serving to subdivide an enterprise according to
production, procurement, maintenance, and materials planning. In all transactions and related
documents, the plant is taken as the reference with respect to which the material is maintained and
valuated.
A storage location is a location within the plant where inventory is stored.
Storage locations are defined for each plant to keep stock of materials.
Separate storage locations are not defined for under test, approved & rejected material, Vendor
Consignments because these are taken care by stock types in SAP.
Storage location is the level at which physical Inventory will be done
Based on these criteria following plant and storage locations will be mapped in SAP:
PLANTS
For naming convention of SAP code for Plant following logic is used
Its four digit code
First two characters from left PL01 denotes Plant location
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Last digit denotes numbers
Plants under EM01 Company code
Plants under EM02 Company code
Description Geographic
Location
SAP Code
CHENNAI Plant CHENNAI PL03
MUMBAI Plant MUMBAI PL04
STORAGE LOCATIONS
A storage location is the place where stock is physically kept within a plant. Material can be storedin more than one storage location within a plant. A storage location can be a physical or logical.
The Storage Location would be assigned to a plant.
For naming convention of SAP code for Storage Location following logic is used
Its four digit alphanumeric code
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Description Geographic
Location
SAP Code
PONDICHERRY Plant PONDICHERRY PL01
KOLKATA Plant KOLKATA PL02
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First two characters from left storage denotes storage
Last characters denotes numbers.
Storage
LocationStorage Location Type
RM01 Raw Materials
SF01 Semi Finished
FG01 Finished goods
PURCHASING ORGANIZATIONS
Purchase Organization is an organizational unit within logistics in SAP, which subdivides the
company to facilitate efficient and effective purchasing. A Purchase Organization procures
materials and services, negotiates conditions of purchase with vendors, and bears responsibility for
such transactions.
A purchasing Organization can be divided into several Purchasing groups that are responsible for
different operational areas.
Purchasing Organization has its own Info Records and Conditions for pricing.
Purchasing Organization has its own vendor master data.
All items in an external purchasing document, that is, request for quotation, purchase order,
contract, or scheduling agreement, belong to a Purchasing Organization
The purchasing Organization serves as the selection criterion for lists of all purchasing documents.
PURCHASING ORGANIZATION FOR EMAMI
At EMAMIL, the purchasing activity is carried out by Central purchase organization located at
Company code level.
For naming convention of SAP code for Purchase Organization following logic is used
First two letters from the word Central purchase organisation ‘CP’ for purchase organization and
digit 01 for number of Pur Org.
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There will be one purchase organizations in EMAMI with functions as described below:
CP01: This purchase organization will deal with all the purchase activities for all the raw materials
and special procurement of materials at all the plants in two companies.
CP01:This purchase organisation will deal with all the purchase activities in all the plants
PURCHASING GROUPS
A purchase organization can be subdivided into purchase groups, which are responsible for
certain day to day-purchasing activities. A Purchasing group can be a buyer or group of
buyers responsible for procuring the material.
A purchasing group can be an individual or a group of individuals responsible for procuring
the materials. It facilitates approval processes for purchasing documents.
Local purchases for different operational areas will be handled through different purchasing
Groups. To facilitate authorizations at this level for proper control over purchases, release
procedures will be used.
Central office will be able to generate reports separately for both local and central purchases
using these purchase groups. Purchasing Groups for EMAMI are defined based on the type
of material being procured.
Purchase Groups: Purchase groups i.e. group of buyers who will be carrying out different
purchase activities for the above-mentioned purchase Organizations.
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SAP CODE PURCHASE ORGANIZATION
CP01
Central
Purchasing Organization for all plants.
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SAP CODE PURCHASER TYPE
001 Herbals
002 Chemicals
003 Packaging
MASTER DATA
Master data, which may include reference data, is information that is key to the operation of
business. This key business information may include data about customers, products, employees,
materials, suppliers, etc. which often turns out to be non-transactional in nature. In this regard,
master data can support transactional processes and operations, but its use is certainly not limited to
such (analytics/reporting is another area greatly dependent on an organization's master data).
Master data is often used by several functional groups and stored in different data systems across an
organization and may or may not be referenced centrally; therefore, the possibility exists for duplicate and/or inaccurate master data.
TYPES OF MASTER DATA
Material Master
Vendor Master
Info Record
Source List
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MATERIAL MASTER
AS-IS PROCESS
There is no standard material codification system in place; each department is using their own
derived materials codes.
To-BE PROCESS
The Material/Service code will be a 10 digit numeric code and External. This code will not be the
same as is used by the organization in the current scenario. The currently used material number can
be maintained in the material master in Old Material Number Field.
The master data will be maintained centrally i.e. same material code across various plants. The
basic data will be the same for all plants but plant specific data will be created for each plant
separately. In that case the material number will be common for all the plants irrespective of the
company to a plant belongs to.
If the data required for a particular function is not maintained in the material master, that function
will not be triggered, for example, if purchasing data does not exist for a material system, it will notallow creation of any purchasing document for that material.
DETAILS IN MATERIAL MASTER
INDUSTRY SECTOR
Industry sectors are created in the Client level and have control functions in the R/3 System. For
example, it is a factor determining the screen sequence and field selection in a material master
record. Once an industry sector has assigned an industry sector to a material, it cannot be change
the subsequently. The standard R/3 System contains the following industry sectors. The ID used toidentify the industry sector internally appears in parentheses.
MATERIAL TYPE
Materials with the same basic attributes are grouped together and assigned to a material type. This
allows managing different materials in a uniform manner in accordance with company's
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requirements. The material type determines certain attributes of the material and has important
control functions. For example, it is a factor determining the screen sequence and field selection in
a material master record. When a material master record is created, the material type determines:
Whether the material number can be assigned internally or externally.
The number range from which the material number is taken.
Which screens appear and in what sequence.
Which departmental data may be entered.
What procurement type the material has; that is, whether it is manufactured in-house or procured
externally, or both.
Together with the plant, the material type determines the material's inventory management
requirement; that is:
Whether changes in quantity are updated in the material master record
Whether changes in value are also updated in the stock accounts in financial accounting
In addition, the accounts affected by a material entering or leaving the warehouse depend on the
material type. The material types that will be used are,
MATERIAL CODIFICATION
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Material Type Description
ROH Raw materials
HALB Semi finished
FERT Finished materials
DIEN Services
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The material code will be a ten-digit number.
Material types and Number range for EMAMIL.
SAP Material
Type
Description SAP Code / Number Range
ROH Raw materials 1100000-1199999
HALB Semi finished 2200000-2299999
FERT Finished materials 3300000-3399999
DIEN Services 6600000-6699999
DESCRIPTION OF IMPROVEMENTS
Centralized material master record will have following benefits:
Requirement of a material in a certain plant will be confirmed by the availability of the same
material in a different plant.
Better control on various functions for example a material can be blocked for procurement if
required while other activities will still be in place.
Instantaneous availability of data for all the functional groups
Security of the master data is improved
Uniform codes ensures better planning
VENDOR MASTER
Business transactions are posted to various accounts and managed using the details in vendor
masters. The master record would have to control how business transactions are recorded and processed by the system.
Vendor master should also provide all the necessary details like type of vendor, address and contact
details, procurement currency, payment terms, etc.
AS-IS
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There is no unique number assigned to a vendor;
A list of vendors, required by the organizations quality Policy is maintained.
TO-BE
Every vendor will be identified by a unique vendor code. In a company, there can be more than one
purchase organization. A vendor code defined in the company need to be extended to the required
purchase organization.
Vendor is domestic type . Vendor’s address, maintained in vendor master.
The vendor code will be a numeric code. This code will not be the same as is used by the
organization in the current scenario, which is generally vendors name.
The master will be maintained centrally i.e. same vendor code across various company codes. This
vendor code will be extended to other companies and purchasing organizations if required. So any
other purchase organization or company will not have a different vendor code for the same vendor.
VENDOR GROUPS
To create a master record, an account group has to be specified. The account group cannot be
changed after the master record has been created.
Account groups determine:
In case of EMAMI, the Vendor Account Groups are as follows:
Account group Description Number range
KRLV Local Vendors Internal numeric
KRFV Foreign Vendors Internal numeric
KROT One-time vendors External alphanumeric
PARTNER FUNCTIONS
Business Partner "vendor" can assume different roles in its dealings with the company.
Accordingly, in a procurement transaction, the “vendor” is first the ordering address, then the
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supplier of goods, then the invoicing party, and finally the payee. For this reason, several partner
roles (partner functions) can be assigned to the vendor.
VENDOR RECONCILIATION ACCOUNTS
At the time of posting items to a subsidiary ledger, the system automatically posts the same data to
a reconciliation account in the general ledger. Each subsidiary ledger has one or more reconciliation
accounts in the general ledger. These reconciliation accounts ensure that the balance of G/L
accounts is always zero. This means balance sheets can be drawn at any time without having to
transfer totals from the sub ledgers to the general ledger.
Vendor master is used by the MM, PM, and FI modules. Vendor master is linked to FI using the
reconciliation account in the vendor master.
DESCRIPTION OF IMPROVEMENTS
Better control on various functions for example a vendor can be blocked for procurement if
required while other activities will still be in place.
Instantaneous availability of data for all the functional groups
Security of the master data is improved
Uniform codes ensures better planning
PURCHASE INFO RECORDS
The purchasing info record should contain information on a specific material and a vendor
supplying the material.
The info records contain the following:
Data such as prices and conditions that can be stored for the relevant purchasing organization or
plant.
Tolerance limits for over deliveries and under deliveries
The planned delivery time (lead time required by the vendor to deliver the material)
Vendor evaluation data
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An indicator showing whether the vendor counts as the regular vendor for the material
The vendor sub-range to which the material belongs.
The availability period during which the vendor can supply the material
AS-IS
The organization does not maintain the historical data for the vendor and material price
combination. Prices are solely adopted in the purchasing documents as per prior negotiations with
the vendor.
TO-BE
The info records will be created automatically as the purchase transactions run. The info record
requires two organization levels: Plant and Purchase Organization.
NUMBER RANGE
Info record Proposed Number Range
For stock material 1100000000 to 1199999999
For Consignment 1200000000 to 1299999999
For Subcontract 1300000000 to 1399999999
DESCRIPTION OF IMPROVEMENTS
Better control on various functions.
Instantaneous availability of data for all the functional groups
Security of the master data is improved
In the info record the details like payment terms, delivery terms, conditions for pricing like
discount, surcharges etc can be stored which will be taken automatically into the purchase order
from purchasing info record.
SOURCE LIST
The source list is used in the administration of sources of supply.
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It specifies the allowed (and disallowed) sources of a material for a certain plant within a
predefined period. Each source is defined by means of a source list record.
AS-IS
The company maintains a source list detailing the list of items a vendor provides as per their QMS
documents.
However, there is no periods defined for the source list.
TO-BE
`
PROCURMENT CYCLE
The procurement process at EMAMI starts with requisition from any department/division in the
form of a material indent. Indent would have the details of materials required, required quantity and
required delivery date. This indent would be sent to the purchasing department, after getting the
required approval.
The purchase department based on the material would send RFQ to the vendors. After receiving the
quotations, they will be compared based on commercial and technical terms. Then the best amongst
them would be selected for the purchase order. A purchase order is then raised based on the
quotation and sent to the vendor. Upon delivery, the goods are receipted by the concerned
department and based on the material type; the item is consumed or taken to inventory. The vendor
then sends the invoice and then the invoice is compared against the goods receipt document.
For some materials, the organization maintains contracts for materials (with or without delivery
date mentioned). For executing the goods delivery, the procurement department sends the vendor a
Release order, which contains the amount of goods to be delivered and the delivery period. The
organization also has a contract with predefined scheduling arrangement, where the dates of
delivery and quantity of material to be delivered will be mentioned in the contract.
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In case the production lines are exhausted, subcontracting of mayonnaise processes takes place, and
the material is delivered to the PONDICHERRY Plant. In special cases (Like in case the production
capacity is to the maximum), the company procures the material and delivers directly to the
customer (Third party sales).
Preservatives are purchased in consignment, i.e. the items are stored at storage location and invoice
is generated as per the consumption of the stock.
For procurement of services, purchase order is raised and details of the service/services are defined
along with the payment terms. Upon completion of the service, a completion of services sheet is
filled.
3.3 REQUIRED BUSINESS PROCESS FLOW DIAGRAM FOR EMAMI
PROCUREMENT FLOW
Purchase
Requisition RFQ QUOTATIONPURCHASE
ORDERGOODSRECIEPT
INVOICE
RECIEPT
SOURCEDETERMINATION
STOCK
REQUIREMENTS/EXPECTATIONS FROM THE PROCUREMENT
• Planning for raw materials
• Planning to place the requisition to cover if any requirement exists
• Approval process for Purchase Requisition
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• Creation of RFQ and sending it to vendors
• Maintaining quotations and price comparison
• Creation of purchase orders or contract in the system
• Different Number ranges for Domestic, Direct purchases and Services
• Approval process for Purchase orders
• The discounts and taxes (if applicable) to be captured in the purchase order
• Printing of Purchase Documents
• Asset Purchase
• Goods Receipt
• Contracts and scheduling arrangement functionality
PURCHASE REQUISITIONS
Purchasing process starts with the generation of purchase requisition (PR). PR is created manually
in a user department or from the location where the material is required. Purchase Requisition
should be raised if there is insufficient stock of material in stores, or if there is either a planned or
an emergency requirement of any material or any services. The concerned authority must duly
approve the purchase requisition.
AS-IS
At EMAMIL purchase request is created manually as well as through MRP, whenever a
material requirement arises.
TO-BE
Purchase process in SAP is initiated through purchase requisition functionality. A purchase
requisition is a request or instruction to Purchasing to procure a certain quantity of a material or a
service so that it is available at a certain point in time.
PURCHASE REQUISITION DOCUMENTS
Purchase requisitions at EMAMIL will be of following types characterized by the document type:
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NB (Standard)
SER (External Service)
PURCHASE REQUISITION NUMBERING
The number ranges for purchase requisitions are:
Document
Type
Description Proposed Number Range
NB Standard Purchase Requisition 4500000 - 4599999
ITEM NO. IN PURCHASE REQUISITION
Item No. in PR is the serial number of the item. There would be a difference of 10 between two
item numbers.
PURCHASE REQUISITION RELEASE PROCEDURE
It is an internal document that is not used outside the enterprise and is subject to a release
(clearance or approval) procedure.
This component is used to set up approval procedures for purchase requisitions. Under such a
procedure, if a purchase requisition fulfills certain conditions (e.g. the total order value exceeds
Rs.10, 000), it has to be approved by a person with the requisite authority (the head of the
department, for instance) before it can be processed further. This process of approving (clearing, or
giving the "green light" to) a proposed item of expenditure is replicated in the SAP System by the
"release procedure".
DESCRIPTION OF IMPROVEMENTS
Following are the benefits & improvements with respect to changes in the existing processes:
Visibility in the process is possible
Source suggestion and source determination
Approved vendors only will be able to supply
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Better tracking of requisition
Proper and efficient tracking of service requisitions and rented item requisition.
RFQ
A request for quotation (RFQ) is an invitation extended by a purchasing organization to a vendor to
submit a quotation (bid) for the supply of materials or performance of services.
QUOTATION
A quotation is an offer by a vendor to a purchasing organization regarding the supply of materials
or performance of services subject to specified conditions.
In Purchasing, the RFQ and the quotation form a single document. Prices and conditions quoted by
vendors will be entered in the original RFQ. In case an RFQ has been issued to several vendors, the
system will determine the most favorable quotation submitted through quotation comparison
functionality.
RFQ TYPE
There would be only two types of RFQ in EMAMI that would be:
AN (RFQ and Quotations)
NUMBER RANGE
The number range for RFQ would be:
Document
Category
Doc Type Description Number Range
A AN RFQ andQuotation
6000000-69999999
IMPROVEMENTS
Tracking of quotations
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Tracking of linkage between PR and RFQ through collective number.
PURCHASE ORDER
The purchase order should contain all the procurement and material / services related information
required by vendor. It should provide the quantity to be purchased, delivery date and other
contractual stipulations. Release order for material or work order for services covered under
contract are required for information regarding delivery of the same. It is a legal document and
should be verified and approved by respective department heads.
AS-IS
EMAMI uses different type of purchase orders.
Standard purchase order – Used for standard domestic material purchase
Service order/Work order -Used for service purchase
Release order/Call out order-Used as call out for material or services contracted
Stock transfer order-Used for material transfer across the plants
Every PO is subjected to a predefined set of approvals based on certain defined criteria.
TO-BE
The system will adopt information from the requisition and the quotation to help the user to create a
purchase order. As with purchase requisitions, Purchase orders can be generated manually or
automatically. Contracts (in the SAP System, types of longer-term purchase agreement) are also
supported. The purchase order will cover all the price heads that are applicable to the purchasing.
PURCHASE ORDER
The purchase order can be used for a variety of procurement purposes. User can procure materials
for direct consumption or for stock. Delivery of the total quantity of material (or performance of thetotal volume of services) specified in a purchase order item can be spread over a certain period in a
delivery schedule. This schedule would be recorded in the PO indicating the individual quantities
with their corresponding planned delivery dates.
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The system will adopt information from the requisition and the quotation to help the user to create a
purchase order. As with purchase requisitions, Purchase orders can be generated manually or
automatically. Contracts (in the SAP System, types of longer-term purchase agreement) are also
supported. The purchase order will cover all the price heads that are applicable to the purchasing.
Purchase order can be generated in different ways.
When Vendor is known at PO generation time .This procedure will be used in case when vendor is
known only prior to PO Creation in the system and not during creation of PR.
Creation of POs from assigned requisitions .This procedure will be used for creating PO with
reference to purchase requisitions already assigned to a vendor at the time of latter’s creation.
The various types of PO for EMAMI would be:
NB (Standard)
UB (Stock Transfer)
Purchase Order Type Purchase Requisition Type
Standard NB Standard NB
Stock Transfer UB Standard UB
PURCHASE ORDER RELEASE PROCEDURE
It is an internal document that is not used outside the enterprise and is subject to a release
(clearance or approval) procedure.
This component is used to set up approval procedures for purchase order. Under such a procedure,
if a purchase order fulfills certain conditions (e.g. the total order value exceeds Rs.10, 000), it has to
be approved by a person with the requisite authority (the head of the department, for instance)
before it can be processed further. This process of approving (clearing, or giving the "green light"
to) a proposed item of expenditure is replicated in the SAP System by the "release procedure".
DESCRIPTION OF IMPROVEMENTS
Better tracking of PO processing.
Tracking of reference of PO with PR and contract.
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OUTLINE AGREEMENT
An Outline Agreement like a contract should be used if the material is required continuously
throughout a certain predefined period at a certain fixed and agreed price or when there exists arequirement of a long-term service. Whenever there is a requirement of the material/ service, this
document should be referred to.
There are two types of Outline Agreements
Contracts
Scheduling Agreements
CONTRACT
The contract should avoid repeated initiation of the procurement process if the material is required
continuously throughout a certain predefined period at a certain fixed and agreed price or when
there exists a requirement of a long term service.
AS-IS
A legal document in the form of a contract is maintained and release orders are raised against the
same. The value of the order and order already processed is not maintained.
TO-BE
NUMBER RANGES
Document
Category
Document
Type
Description Proposed Number Range
K WK Value contract
460000 - 469999
K MK Quantity contract 470000 - 479999
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RELEASE STRATEGIES
Like purchase requisition, purchase order, contract is also subjected to release strategies. If there is
a business process requirement that the respective authority should duly approve the contract, thenit must pass through electronic signature or approval. Also since it is an outline agreement, it should
be approved.
Along with several approvals, tender committee, comprising of personnel form different department
approves contract.
ATTACHMENTS IN A CONTRACT
Each contract document in SAP will be having limited information like validity, price, quantity etc.
It will not store the information such as terms and conditions, legal details etc, which are generally
a part of legal contract. All those details can be attached to the contract document in SAP as an
attachment.
DESCRIPTION OF IMPROVEMENTS
Visibility in the process is possible
Default source assignment for contracted material
Better tracking of PR and release order for particular contract
SCHEDULING AGREEMENT
The scheduling agreement should be raised if the requirement for procurement of material is on a
long duration basis. The delivery schedule should be given to vendor in advance in order to ensure
compliance to the delivery dates. This should be used only when there is no requirement of raising
a PO to same vendor and the quantity and schedule is known.
AS-IS
The company has a scheduling agreement for dyes and delivery dates are provided to the customer
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TO-BE
In outline purchase agreement materials are procured on predetermined dates within a certain time
period and with particular terms and conditions. Delivery of the total quantity of material specified
in a scheduling agreement item is spread over a certain period as per a delivery schedule that
indicates the individual quantities with their corresponding planned delivery dates. The scheduling
agreement has following features:
The following procurement types exist:
Standard
NUMBER RANGE
The number range proposed is:
Document Type Description Proposed Number Range
LP Quantity3500000000 to 3599999999
ATTACHMENTS IN A SCHEDULING AGREEMENT DOCUMENT
Each SA document in SAP will be having all information regarding the required purchase. It will
not store the information such as drawings, terms and condition documents etc. All those details can
be attached to the SA document in SAP as an attachment.
DESCRIPTION OF IMPROVEMENTS
Visibility in the process is possible
Default source assignment for contracted material
Better tracking of gas nominations, confirmations and quantity received.
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SERVICES PROCUREMENT
Procurement of external services follows the same cycle as procurement of materials, with somechanges at document levels.
The service entry sheet should be used to ensure that the service(s) received are accepted by the
concern authorities. The service entry sheet should be duly approved by the respective department
head in order to create the liability in SR / IR clearing account.
SPECIAL ORGANIZATIONAL CONSIDERATIONS
A service comprises of a number of sub services. Sub services again can be broken to activities and
task levels. For example, AMC is a service, which is consolidation of various service phases and
various activities to be performed either stage wise or parallel. Preliminary (single activity or task)
level service needs to be defined as a service and needs to be maintained into service master.
Service entry sheet for every preliminary activity under major service is created and maintained.
While making the service entry sheet, a liability to pay the vendor is created in SR/IR clearing
account. If any service is procured with the material e.g. transportation, and cost is to be included in
material cost, this would not be covered under services management.
Service entry sheet is review and closed for predefined invoicing period.
Service entry sheet is maintained at site and is to be certified by relevant authority. Service entry
sheet must undergo release strategy.
AS-IS
The purchase order for material is the same as the purchase order for the service.
TO BE
MM External Services Management is an application component within the Materials Management
(MM) module. It supports the complete cycle of bid invitation, order placement phase, and
acceptance of services, as well as the invoice verification process.
Service Entry Sheet is made with reference to the Purchase Order and the percentage of the services
performed.
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NUMBER RANGE
The number range proposed for EMAMIL is 1000000000 to 1999999999.
RELEASE STRATEGIES
Like other purchasing documents Service Entry sheet is also subjected to release strategies.
The responsible authority should duly approve the service entry sheet since, after the acceptance, it
creates the liability in SR/ IR clearing account for invoice verification.
ATTACHMENTS IN A SERVICE ENTRY SHEET DOCUMENT
Each Service Entry Sheet document in SAP will be having information regarding the required
services received. It will not store the information such as terms and condition documents etc. All
those details can be attached to the Service Entry Sheet document in SAP as an attachment.
INVENTORY MANAGEMENT
AS-IS SITUATION
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Material fromsupplier
GENERAL
INSPECTIO
N
Material acceptedMaterial
RejectedMaterial sent back
to supplier or kept
for rework.
OK
NOT OK
Material kept in
respective storage
area.
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The goods from the supplier are received at the storage area and the information is given to the
quality department along with the test certificate. Then the inspection of material takes place as per
the sampling plan. If the material inspected is ok it will be kept in respective storage area and if the
material is not ok, it is either rejected or sent back to supplier. In Special cases, it will be kept for
rework, if rework is possible at the company premises. These charges will be incurred from
supplier.
The Goods Receipts Process should ensure that the quantity of the materials is as per the desired
specifications as in the Purchase Order or Contract Release order and it should ensure that the
required materials, components and spares are delivered to the concerned user in time. The GR
process should be reflected in inventory and accounts. In EMAMI, goods receipt will be carried out
against a purchase order document, or stock transfer document. However, in some exceptional
cases like emergency purchase etc., goods receipt can be done without reference of any of these
documents. In the case of goods receipt with/without reference of PO/STO following requirements
should be fulfilled:
Goods to be received with/without PO
Goods receipt against a delivery (stock transfer with delivery)
Physical verification of goods before entering into the system.
Materials are also received based on reservations created by the buyer.
Need to capture delivery details (LR no, delivery note, expiry date quantity in delivery note, etc)
Credit GR/IR account and debit inventory account
Over/Under delivery tolerance shall be complied with.
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TO-BE structure is arrived considering all the requirements.
TO-BE STRUCTURE
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Material from
supplier with
PO
Materialreceived wrt
PO as QI stock
GENER
ALINSPE
CTION
Material moved to
unrestricted stock type
from QI stock.
Tcode: MIGO
Mtype: 101
Material
RejectedMaterial kept in the plant for
rework and the charges will beincurred from sup.
Material sent back to supplier
with approval.
Supplier sends back new set of
materials.
OK
NOT OK
NOT OK
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Goods movement between intra-company
Stock Types: SAP provides the functionality of segregation of various stocks on the basis of its
usage. These stock types are managed at plant level. Following stock types are available:
Stock TypeDescription
Total Valuated Stock Sum of all valuated stock of a material. It consists of all
the stock company owns.
Unrestricted Use Stock Company's own stock that is physically located in the
warehouse, valuated, and not subject to any kind of
usage restrictions
GR Blocked Stock Goods Receipt stock which is pending for Physical
Inspection
Blocked stock Company’s own stock that is not to be used. (Rejected
materials are also kept here)
Restricted Use Stock Valuated stock of a material managed in batches held
by a company (and belonging to that company), usage
of which is subject to certain restrictions. This category
of stock is only used when batch status management is
active.
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Stock Type
Description
Stock in Transfer Quantity that was already withdrawn from stock at the
issuing location (plant, storage location) during a two-
step stock transfer but that has not yet arrived at the
receiving location (plant, storage location). Stock in
transfer is managed in the valuated stock of the
receiving location, but it does not yet count as
unrestricted-use stock. It can also not be inventoried
Stock in transit Stock in transfer that is created for a stock transfer
through an STO and for Transfer posting in two stepsDocument Concept: According to the document principle, a document must be generated and
stored in the system for every transaction/event that causes a change in stock. When posting a
goods movement in the SAP system, material document and accounting documents are created
which are explained below:
Material Document: In the Inventory Management system, when a goods movement is posted, a
material document is generated that serves as proof of the movement and as a source of information
for any applications that follow.
Accounting Document: If the movement is relevant for Financial Accounting (that is, if it leads to
an update of the G/L accounts), an accounting document is created parallel to the material
document.
Movement Types: When a goods movement is entered in the system, a movement type must be
entered to differentiate between the various goods movements. A movement type is a three-digit
identification key for a goods movement. The following table contains examples of movement
types
Goods Movement Transaction code Movement Type
Goods Receipt for Purchase Order into Unrestricted use
Stock
MIGO 101
Goods receipt for Purchase Order into GR Blocked Stock MIGO 103
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Goods Movement
Transaction code Movement Type
Release from GR Blocked Stock MIGO 105
Return to vendor from unrestricted stock MB1C 122
Return to vendor from blocked Stock MB1C 124
The reversal movement types are for reversing the above goods movement. These movement types
are numbered as +1 for the movement to be reversed. For example reversal of 101 is 102. The
system automatically determines the reversal movement type. The movement type has important
control functions in Inventory Management.
For example, the movement type plays an important role in
Updating of quantity fields.
Updating of stock and consumption accounts.
Determining which fields are displayed during entry of a document in the system.
GOODS RECIEPT
Goods receipt process in SAP is used to receive the material ordered in the PO or Contract release
order. This process enables the plant / process to be run efficiently. The GR can be done withreference to PO/RO or without PO. The only difference is that the system creates a PO in
background.
The goods receipt is planned by the purchasing component in the form of purchase order scheduled
due dates. The purchase order data get copied into the GR document according to the delivery
schedule of the material. Quantity can be decreased or increased based on actual supply but within
the tolerance limit set in the material master. Other information can also be captured such as LR
number, Delivery note quantity, Vendor Batch No., Manufacturing date; Expiry date, name of
manufacturer; Header text & GR slip number. Goods receipt can also be made without a purchase
order using movement type 505. Then after physical inspection the goods will be transfer posted to
unrestricted use stock using movement type 343. The goods receipt with respect to a purchase order
will be made into Blocked stock first and then physically verified, and if found ok then only it will
be released to unrestricted use stock.
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TYPE OF GR / MATERIAL DOCUMENT
Whenever there is a transaction in inventory management, the system creates a document calledmaterial document .The GR type proposed for EMAMI is:
WE (Goods receipts for purchase orders)
WA (Other Goods Receipts and Transfer Postings)
NUMBER RANGE
The Proposed Number range for GR is 5000000000 to 5999999999 for one year.
Document
Category
Description Number Range
WE Goods receipts for purchase
orders
5000000000 to 5999999999
WAGoods issues, transfer postings,
other goods receipts
6000000000 to 6999999999
ACCOUNT MOVEMENT
When GR is posted the following entries are passed in system:
Stock Account Debited
GR/IR clearing account Credited
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be on the basis
of quantity as well as value.
Tracking of various Goods Receipts is easy.
Total visibility of stock across the organization. This will include the stock of materials, plant &
storage location wise.
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Materials in the blocked cannot be used, thus keeping a check on usage of materials.
Materials will be received within the tolerance limit, thus over & under deliveries can be allowed
but with in limits. This will give flexibility as well as control.
Multiple Goods receipts can be made against a purchase order .
INVENTORY MANAGEMENT (GOODS ISSUES)
AS - IS SITUATION
In EMAMI, the materials which are stored in storage location after the Quality Inspection will be
issued to the production order for the accomplishment of production. Also the material will be
issued to material indent raised by the different departments and to the transfer orders where the
material will be transferred from one plant to another plant.
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Material stored instorage area after
QI.
Materialissue to
Production
orders
Materialissue to
Transfer orders
Materialissue to
Indent
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REQUIREMENTS/EXPECTATIONS
The Goods Issue process should be used in case of material requirement by any department, Project
or Plant Maintenance activity. The goods issue should be done in such a way that there is optimum
use of the material required and the inventory level is within the prescribed range.
Goods issue (to cost centre, to project, to Plant Maintenance Order, Stock Transport Order)
Goods issue with or without reservation.
Interplant stock transfer.
TO-BE STRUCTURE
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Material stored in
storage area after
QI.
Material
issue to
CostCenter
Tcode:
MB1A
Material
issue to
Production
orders.
Tcode :MIGO
Material
issue to
Stock Transport
orders
Tcode:
MIGO
Material
issue to
Reservation
Tcode:
MB1A
Material
issue to
Plantmaintenan
ce order
Tcode:
MIGO
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Movement Types: When a goods movement is entered in the system, a movement type must be
entered to differentiate between the various goods movements. A movement type is a three-digit
identification key for a goods movement. The following table contains examples of movement
types
Goods Movement Transaction
Codes
Movement Type
Goods issue for Consumption to a Cost Centre from Unrestricted Use Stock MB1A 201
Goods issue for Consumption to a Cost Centre from Consignment Stock MB1A 201K
Goods issue for Consumption to a Plant Maintenance Order from
Unrestricted Use Stock
MB1A 261
Goods issue for Consumption to a Plant Maintenance Order from
Consignment Stock
MB1A 261K
The reversal movement types are for reversing the above goods movement. These movement types
are numbered as +1 for the movement to be reversed. For example reversal of 201 is 202. The
system automatically determines the reversal movement type. The movement type has important
control functions in Inventory Management.
For example, the movement type plays an important role in
Updating of quantity fields.
Updating of stock and consumption accounts.
Determining which fields are displayed during entry of a document in the system.
GOODS ISSUE
Goods issue refers to withdrawal of material by a department for use, and leads to a reduction in
warehouse stock. Proposed goods issues for EMAMI are:
(WA) Withdrawal of material for consumption.
(WI) Inventory Adjustment Postings
(WL) Goods Movements for Delivery Documents (SD)
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(WZ) Batch Status Changes
NUMBER RANGES
Document
Category
Description Number Range
WA Goods issues, transfer postings,
other goods receipts
6000000000 to 6999999999
WI Inventory Adjustment Postings
WLGoods Movements for Delivery
Documents (SD)
WZ Batch Status Changes
ATTACHMENTS IN A GI DOCUMENT
Each GI document in SAP will be having all information regarding the required goods received. If
additional details are to be attached with the GI document, those details can be attached to the GI
document in SAP as an attachment
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be on the
basis of quantity as well as value.
Tracking of various Goods issues is easy.
Total visibility of stock across the organization. This will include the stock of materials, plant
& storage location wise.
IM (GOODS RETURNS TO VENDOR)
REQUIREMENTS/EXPECTATIONS
To ensure that material that has a discrepancy in terms of quantity or quality is returned to
the vendor .
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WL Goods Movements for Delivery
Documents (SD)
WZBatch Status Changes
ATTACHMENTS IN A GOODS RETURN DOCUMENT
Each document in SAP will be having all information regarding the required goods returned. If
additional details are to be attached with the document, those details can be attached to the
document in SAP as an attachment.
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be on the basis
of quantity as well as value.
Tracking of various Goods movement is easy.
Track of returns to vendors is easy.
Materials in the blocked cannot be used, thus keeping a check on usage of materials.
IM (Transfer Posting / Stock Transfer)
REQUIREMENTS/EXPECTATIONS
It may be required to transfer material from one plant or storage location to another plant / location.
Especially in the case of EMAMI transfer of stock from storage location to another storage location
within a plant is very frequent. This transaction is to be used for material to be provided to the
receiving location. In some special cases the stock may be transferred from one plant to another
plant. This is to be treated as a stock transport activity for which a Stock transport Order will be
used.
GENERAL EXPLANATIONS
EMAMI has a storage location in the each plant and the material is transferred from one location to
another as per the requirement. This material will be transferred from the issuing location on
request of the receiving location.
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Transfer posting will be of the following types:
Goods Transfer Plant to Plant – Two Step Procedure
Goods can be transferred from one plant to another with a delivery against a stock transport order.
A stock transport order is required for this kind of Stock transfer.
EXPLANATIONS OF FUNCTIONS AND EVENTS
Events: The events in the Stock Transfer/Transfer Posting process are
Receipt of Material Load Out form for Transfer Posting
Receipt of approval for stock transfer against a STO.
Physical checking of material transferred
Functions: The functions of Stock Transfer/Transfer Posting process are
Creation/Changing/Displaying Material transfers records
Collection of Stock Transfer/Transfer Posting data to be entered into the system.
Creating/Changing of Stock Transfer/Transfer Posting document to reflect the required movement
of goods into blocked stock
CHANGES TO EXISTING ORGANIZATION PROCESSES
The current process of Goods Transfers in EMAMI would be replaced by the standard Stock
Transfer/Transfer Posting process of SAP.
In case of inter plant transfers the loss in transit has to be scrapped out through a different
transaction
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be on the
basis of quantity as well as value.
Tracking of various Goods movement is easy.
Track of returns to vendors is easy.
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Materials in the blocked cannot be used, thus keeping a check on usage of materials
SOLUTION IN SAP
STOCK TRANSFER (PLANT TO PLANT)
A stock transfer from plant to plant not only leads to a change in stock quantity in both plants; if
both plants are assigned to different valuation areas, an accounting document is also created.
This type of stock transfer can only be carried out from unrestricted-use stock of the issuing plant to
unrestricted-use stock of the receiving plant. It will be a two-step procedure
In the first step the stock will be removed from issuing storage location with reference to a
Stock Transfer Order. A material document will be created for quantity postings along with
an accounting document for financial postings in this case. The stock quantity will be reduced
in the issuing storage location of the issuing plant. The stock will be shown in transit at
receiving storage location of receiving plant, and not in the unrestricted use stock of the
receiving plant
In the second step the goods will be received into the receiving storage location with reference
to the Stock transport Order. In this case only a material document will be created thus
increasing the stock in unrestricted stock at receiving storage location of the receiving plant
and will not be shown as stock in transit any more. In this step there will be no accounting
document created as it has already been created in the first step.
TRANSFER POSTING (STORAGE LOCATION TO STORAGE LOCATION) –
Tcode:MB1B
The materials transfer postings from storage location to storage location in a plant will not lead to
creation of an accounting document because the valuation of the material is same in both the
location under the plant. The transfer postings can be made in the two following ways:
Transfer Posting from Storage location to Storage Location in single step:
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Material will be posted from one storage location to another storage location in a single step
using movement type 311. There will be a material document created showing the respective
movement of the goods.
Transfer Posting from Storage Location to Storage Location in two steps:
A stock transfer from storage location to storage location in the same plant simply causes an
update of the stock quantities in both storage locations. The stock value remains unchanged,
and the event is not relevant for accounting. A stock transfer from storage location to storage
location is possible for all stock types. The process for this done in two steps
Removal of stock from issuing storage location: The stock will be removed from the issuing
storage location using movement type 313. A material document will be created showing the
material movement. The stock quantity will be reduced in the issuing storage location and
will be shown as stock in transfer at the receiving storage location.
Placement of Stock in receiving storage location: The stock will be received into the receiving
storage location with reference to the material document created at the time of removal of
stock from issuing storage location using movement type 315. A material document created
and the stock will be updated in the unrestricted use stock of the receiving storage location.
ONE STEP AND TWO STEP STOCK TRANSFER
Both stock transfers and transfer postings consist of a "goods issue" from an issuing point and a
"goods receipt" at a receiving point. Stock transfer from storage location to storage location or from
plant to plant either in one step or in two steps can be posted.
The advantage of the one-step procedure is that there is a single transaction in the system. The two-
step procedure, on the other hand, allows monitoring the stocks in transit. After the goods issue is
posted at the issuing point, the stock appears "in stock transfer" at the receiving point and is
managed as such in the system.
The two-step procedure is also required if users have authorizations only for their own plants.
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REQUIREMENTS/EXPECTATIONS
Every industry periodically wants to check what is the stocks balance in the books and physical
stocks lying in their stores. And once they know the actual stocks, will adjust the book stocks
accordingly. It helps:
To back up the balance sheet stock figures.
To minimize pilferage and fraudulent practices.
TO-BE STRUCTURE
SOLUTION IN SAP
PHYSICAL INVENTORY PROCEDURES
The physical inventory procedures are as follows:
Periodic Inventory
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If there is difference between book stocks and physical ststock
PHYSICALINVENTORYDOCUMENT
COUNT
Post
DifferenceUpdates stocksautomatically
Updates Accounts
Automatically
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In a periodic inventory, all stocks of the company are physically counted on the balance sheet key
date. In this case, all material items must be counted. During counting, the entire warehouse must
be blocked for material movements.
Continuous Inventory
In the continuous inventory procedure, stocks are counted continuously during the entire fiscal year.
In this case, it is important to ensure that all material is physically counted at least once during the
year.
Cycle Counting
Cycle counting is a method of physical inventory where inventory is counted at regular intervals
within a fiscal year. These intervals (or cycles) depend on the cycle counting indicator set for the
materials.
Inventory Sampling
In MM inventory sampling, randomly selected stocks of the company are physically counted on the
balance sheet key date. If the variances between the result of the count and the book inventory
balance are small enough, it is presumed that the book inventory balances for the other stocks are
correct.
PHYSICAL INVENTORY
In the R/3 System, physical inventory can be carried out for a company’s own stock. Furthermore,
the stock can be divided into stock types. In the standard system, a physical inventory can be
carried out for the following stock types:
Unrestricted-use stock in the warehouse
Quality inspection stock
Blocked stock
Physical Inventory is carried out in SAP in three steps
Create physical inventory document
Inventory count
Post the difference.
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The plant and storage location in which the count is to take place
When the count is to take place
Which materials are to be counted
For material handled in batches: which batches are to be counted
In the case of split valuation: which sub-stocks are to be counted
Which stock types are to be counted
BLOCKING MATERIALS FOR POSTING
Due to the delay between a material movement and the posting of that movement, there is a short-
term discrepancy between actual warehouse stock and book inventory. To avoid such a discrepancy
during physical inventory, it is recommended to block the materials for posting during the physical
inventory. A posting block can be set in two ways:
Block the relevant materials and generate the physical inventory document. This is
recommended to create the physical inventory document immediately before the count.
Block the relevant materials later by changing the posted physical inventory document. This
is recommended if the physical inventory document immediately is not created before the
count.
The posting block is automatically cancelled after posting the counting results for the physical
inventory document.
Print and distribute the physical inventory document. Print out the physical inventory
document for the physical inventory count and pass it on to the people responsible for doing
the counting.
INVENTORY COUNT
The stocks are counted individually for the materials in a physical inventory document.
The count results are written on the printout of the physical inventory document.
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The printout is then directed back to the person responsible, so that he or she can enter the
count into the system and analyze it.
ENTERING THE COUNT RESULTS IN THE SYSTEM (Tcode: MI04)
After the count has been taken, enter the results of the count into the system.
POSTING INVENTORY DIFFERENCES (Tcode: MI07)
If the physical inventory is different from the book inventory, the book inventory balances must be
corrected by posting the differences. This step ends the physical inventory process.
When physical inventory difference is posted, the system creates a material document that records
the adjusted stock balances and an accounting document that contains the necessary accountactivities.
When inventory difference is posted, the material master record is changed; total stock is
automatically adjusted to the counted quantity. From the accounting point of view, this corresponds
to a goods receipt or goods issue, meaning that when the inventory difference is posted, the stock
account is debited or credited.
If the counted quantity is smaller than the book inventory balance, the stock account is credited
with the value, “inventory difference x price”. The offsetting entry is made in the "Expense from
physical inventory" account.
If the counted quantity is greater than the book inventory balance, the stock account is debited with
the value of the “inventory difference x price”. The offsetting entry is made to the "Income from
physical inventory" account.
Since the amount posted is calculated on the basis of the current standard or moving average price,
posting inventory differences does not lead to a price change.
If there is any discrepancy in the count (After posting of differences), Recounting can be carried
out.
INITIATING A RECOUNT
It is possible to initiate recounts for individual items on a physical inventory document. This is
recommended if an error was made during counting. When a recount is initiated, a new physical
inventory document is created.
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SESSIONS METHOD
Session’s method is to be used for creating physical inventory documents of many materials
automatically with selection parameters like material numbers range, material type etc. Thefollowing steps are involved for executing this method.
Create a session for the objects in question.
The session is "processed" meaning the system carries out the transaction for every object.
One advantage of this procedure is that it saves monotonous entry time. Another is that a session
can be processed at various times, allowing company’s system administrator to better utilize the
capacities of the computer
NUMBER RANGES
Document Category Description Number Range
IB Physical inventory documents 100000 to 199999
200000 to 299999
300000 to 399999
400000 to 499999
IDPhysical inventory documents
for counts and differences
without reference
IN Physical inventory documents
for recounts
IZ Physical inventory documents
for count without reference
ATTACHMENTS IN A PHYSICAL INVENTORY DOCUMENT
Each Physical Inventory document in SAP will be having all information regarding the countingdetails, difference postings etc. If additional details are to be attached with the document, those
details can be attached to the document in SAP as an attachment.
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DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions
Financial implications captured regularly
ACCOUNT DETERMINATION
Account Determination should provide information about the accounts movement in purchasing,
inventory management, physical inventory and invoice verification. It should therefore be enabled
to capture the financial impact on any transaction, including movement of that material. The
different materials falling under the same material type can either be posted to in one G/L account
or different accounts as per requirement.
GENERAL EXPLANATIONS
EMAMI Purchases various types of materials and services. The accounts movement is different for
services and materials. There are separate accounts for materials and services. E.g. the GR/IR
clearing account for materials has the description “GR/IR Clearing Account“ and the ”SR/IR
Clearing Account” is for services. Similarly there is a provision for inventory related accounts.
These accounts would be both general and specific as per requirements.
EXPLANATIONS OF FUNCTIONS AND EVENTS
Events:
Automatic account determination is used by the system for posting the values to the proper
G/L accounts in many instances such as during creation of GRN / GI documents, processing
IV, etc.
Functions:
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Automatic Account determination updates the proper G/L account to reflect
the current financial status.
Solution in SAP
In SAP a valuation class is assigned to each material type. A material type may have one or more
valuation classes depending upon the requirement. The valuation class is assigned to one or more
G/L accounts as per the requirement. Various types of G/L accounts are GR/IR clearing, inventory
posting account etc.
Batch Management
As-Is
Earlier EMAMI was using it’s own methodology to name batches.
To-Be
We are going to implement batch management in EMAMI for procurement of raw materials.