Mm Chapter

7/31/2019 Mm Chapter

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Quarles: Flya Kite MM 1

Material Management

MM

How the company procures and tracks the

materials it uses and sells.


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The Module Concept

Material management describes all purchasing activities for materials

and services,

all goods receipt functions,

storingof materials and issuing materials and services for

further use.

The MM module is fully integratedinto any SAP business model anddemands integrated thinking andplanning.


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MM Functionality

Describes all materials and services

All vendors are described in MM and FI

Where all purchasing activities occur

Stores material-supplier relationshipsHolds information and rules of how to

issuematerial and services in SAP.


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Organizational Structures

Client

Company Code

Plant

Storage Location

PurchasingGroup

PurchasingOrganization


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Client

Highest hierarchical level in an SAPsystem

A complete database containing all

the tables necessary for creating afully integrated system

Master records are created per client


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Company Code

A required structural elementA legally independent entity

The smallest organizational unit for

which accounting can be carried outWhere business transactions are processed

Whereaccounts are managed

Where legalindividualfinancial statements,such as the balance sheet and the profit andloss statement, are created


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The Plant

Lowest valuation area

Organizational level

where MRP runsGenerally used to describe a

production site, a distribution center

or centralized warehouseMay be a physical or logical unit



Storage Location

Subdivision of a plant

Where materials are managed.

May be a physical or logical unit.



Purchasing Group

Is responsible for specified purchasingactivities

Represents buyer(s)

Used for reporting

Optional element



Purchasing Organizations

Organizational unit responsible forthe procurement of materials andservices for one or many plants andfor negotiating prices and terms of

delivery with a vendorAssignment to plant(s) is mandatory

Assignment to company codes is

possibleRequired element not optional



Purchasing Organization



Organizational Data

Flya Kite Corporation

Client ......


USA Company Code CC00


Mexico CCMX

Plant 2000

Manufacturing site

Storage location

0010 warehouse

Storage location

0020 production

Storage location

0030 shipping

Dist.Center 0001

Mexico City

Dist.Center 0002

Cancun



Master Data



Vendor / Supplier Master

In SAP, all pertinent information

about a vendor is stored in thevendor master record.

Vendor data will be used by

MMpurchasingFI/COaccounting and controlling

PP - production

Vendors can be organized in vendoraccount groups.



Vendor Account Group

Vendor masters are assigned to a

vendor account group.

Through field status maintenance,vendor account groups can be setup for

one-time vendors, regional vendors,internal vendors, etc. a managementdecision as to how to do this

The vendor account group controlsboth type and number rangeassignment for vendors.



Vendor / Supplier Master

By editing the field statuses, amultitude of vendor account groupscan be created.

In MM the vendor account numberwill be created and used - additionalfunctionality will be addedinsubsequent modules

Vendor master data is maintained byboth the A/Pand the purchasingdepartments.



Material Master

Each and every material in the system musthave a material master record

Material related transactions cannot take placewithout this record

Contains the material related pertinent data totrack and process transactions throughout thesystem

DANGER WARNING BEWARE

Material master record is tedious, contains a lot of

minute details, and is very, very critical to a greatnumber of downstream transactions

Mess this record up and you will pay at a futuretime and date in transactions in modules manylight years away



Material MasterThe most integrated record in SAP

MM uses it to procure and trackmaterials

PP uses it in planning and carrying outproduction

SD uses it in selling and distributing theproduct to customers

FI/CO uses it invoice customers andtrack costs of sales/production

Users in these areas have differentviews of the master record



Material Master - Views

Basic dataClassification

Sales: sales organizationdata

Sales: general/plant data

Sales text

Purchasing

Purchase order text

ForecastingMORE



Material Master - Views

MRP 1, 2

Work scheduling

Storage

Warehouse management

Quality management

AccountingCosting



Material Types



Material Type

Used to categorize materials. Ex: raw materials, finished goods,

trading goods, etc.

Defines the materialattributes, e.g.,valuation, procurement, pricecontrol

Also controls screen sequence,number assignment field selection,account determination



Material Type - Examples

ROH - raw materials, purchased externallyonly, no sales view

HAWA- trading goods, always purchasedexternally, are sold without any change to

the material, no manufacturing views exist

FERT-finished products are producedinternally no purchasing view exists


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Purchasing Info Record

The purchasing info record providescontinuously updated information aboutthe relationshipof a specific materialwith aspecific vendor. Order unit, price, price changes,

tolerances, reminder infos, historic data,statistics, texts

Once this record is created, the particularvendor is automatically selected when thespecific material is to be purchased

Choice of automatic or manual updating


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Transactions


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Transactions

Transactions describe business

activities in SAP.Number ranges are assigned to

transactions to allow unique documents

to be created for every singletransaction.

Every transaction follows pre-configured rules.

Unlike master data transactional data isdynamic - it constantly changes, usuallymany times per day.

A t ti A t A i t


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Automatic Account Assignment

A a set of rules and master data which enablethe financial tracking of logistics movements.

Created to avoid manual postings of financialtransactionswhich follow goods movementsto reflect the values of transferred materials. Movements create journal entries

Ex: when physical movement of a quantity of a material isrecorded by scanning a bar code, a journal entry with theappropriate debit and credit is entered by the system inthe appropriate ledger(s)

Used across all modules to keep track of thevalues of materialsthat are beingconsumed(e.g., production), or transferredinto othervaluation areas of the company.


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Automatic Account Assignment

Example

-Debit posting $100 -Credit posting $100

-VBR goods issue -GBB offsetting

to consumption raw material

material expenses inventory account

account 701000 102000

-Movement type 261


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Goods Receipt

Materials can be received as stockitems or non-stock items.

Stock: capitalize and track as used

Non-stock: expensed but quantitymay be tracked

Receipt is possible from external or

internal sources.


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Goods Receipt

Tolerance limits can be set for goodsreceipt.

How much variation from the data in the

purchase order will be allowed


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Set rules for invoice receipt Quantity, price, receiving date

Updates material master cost if movingaverage price is used

Automatic account assignment for pricedifferences if allowed

Verify actual versus target

Invoice Verification


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Invoice Verification

Three Way Check

Purchase ordertarget quantity

target price

Goods receipt -actual quantity

Invoice receiptactual price


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FI - MM Integration Points

Invoice

receiptPayment

ProgramGoods

Receipt

AP(Vendor)

D+ C-

GR / IR

$100

Bank

D+ C-

Inventory

$100

$100$100

D+ C-D+ C-

$100

$100

$100

$100

Recon.

AccountD+ C-


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Procurement Activities

From requisition to purchase order

Purchase Order

Order Type

Vendor

Material/Service

Quantity

Delivery Date Price

Text

Add. Terms

Goods

Receipt

Requisition

Material/Service

Quantity

Delivery Date

Acct.Assn. Category

Item Category Text

Plant

Inventory

Consumption

Fl Kit MM T ti


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Flya Kite MM Transactions

EXERCISE MM01: CREATE GENERAL

LEDGER RECONCILIATION ACCOUNT

We will create the control account in thegeneral ledger that links to the accountspayable subledger where the individualamounts owed to vendors are trackedReconciliation account must exist before a

purchase can be recorded

EXERCISE MM02: CREATE VENDOR

MASTER ACCOUNTING RECORDS

Must create a record of the basic datarelated to the vendor (name, address, etc.)before anything can be purchased fromthat vendor

Fl Kit MM T ti


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MASTER PURCHASING RECORD

Creation of the purchasing views for thevendor created in the previous exercise

The previously created vendor master record

will be extended to include the data necessaryto make a purchae

Assignment to a purchasing organization within FlyaKite that will make all purchases from this vendor

Specification of currency to be used

Setting up payment termsd

Fl Kit MM T ti


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MASTER RECORDS CENTRALLY

Creation of another vendor but rather thancreating the various views individually (asin the previous two exercises) all views

necessary to make the purchase arecreated at one time when done centrally

Fl a Kite MM Transactions


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EXERCISE MM05: CREATE MATERIAL

MASTER RECORD FOR RAW MATERIALS

Must have a material master record for a materialbefore it can be purchased, managed, tracked,costed, etc.

Creates all the views necessary

Basic data basic data for the material (name, description,unit of measure, etc)

Purchasing data needed to make purchases of thismaterial

General Plant / Data Storage 1 must be able to track thematerial in the plant

Accounting data to get the vendor paid

Controlling data to transfer the cost of the raw material tothe finished good it will be used to produce (in PP) forproduct costing



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Flya Kite MM Transactions EXERCISE MM06: CREATE MATERIAL MASTER

RECORD FOR TRADING GOODS*

Must have a material master record for a material before it canbe purchased, managed, tracked, costed, etc.


Basic data basic data for the material (name, description, unit ofmeasure, etc)

Purchasing data needed to make purchases of this material General Plant / Data Storage 1 must be able to track the material

in the plant

Accounting data to get the vendor paid

Controlling data to transfer the cost of the material for product

profitability determination* Trading goods are goods that a bought in order to be resold unlike raw materials that

are bought to become components of finished goods (i.e., manufactured goods)



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Flya Kite MM Transactions EXERCISE MM07: CREATE MATERIAL MASTER

RECORD FOR FINISHED GOODS*

Must have a material master record for a material before it canbe purchased, managed, tracked, costed, etc.


Basic data basic data for the material (name, description, unit ofmeasure, etc)

Accounting data to get the vendor paid Controlling data to transfer the cost of the material for product

profitability determination

Notice no Purchasing or General Plant Data Storage views -these goods are manufactured, not purchased and are not

tracked data storage wise in the same manner as raw materialsor trading goods

* Finished goods are goods that are manufactured by the company from raw materials(and in some cases, trading goods)



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EXERCISE MM08: CREATE PURCHASING INFO

RECORDS

Creates a linkage between materials to be purchasedand a specific vendor from whom they will beacquired

Vendor can be pre-certified and various factors (e.g.,

price, delivery time, standard quantity, etc.) can bepredetermined so that purchasing activity time andcost can be reduced

Only data needed to complete a purchase would be

the material(s) needed and their quantities



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EXERCISE MM09: CREATE PURCHASING

REQUISITION FOR STOCK ITEMS

Purchase requisition is an internal document thatnotifies the purchasing organization of the need formaterials, the quantity involved, delivery daterequired, and where the materials will be stored when

they are delivered Although not completed in this case, the appropriate

approval authority would approve the purchase ofthese materials and assume responsibility for their

costs by approving the requisition



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EXERCISE MM10: CREATE PURCHASE ORDER

Using the data from the purchase requisition,

purchasing creates the purchase order to be sent tothe vendor

The purchase order is a legal offer to buy thatcommits the company to receive and pay for thematerials ordered

Copying the Requisition data eliminates needto again input the specifics of the materials tobe purchased

Automatically assigning the source of supplyutilizes the Purchasing Info Record toeliminate the need to input vendor data it isautomatically loaded from to the purchaseorder



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EXERCISE MM11: CREATE A GOODS RECEIPT

When the ordered goods are delivered, they must be

received not only physically but the data related tothat receipt must be entered into the system

Referencing the purchase order number brings in thepertinent data related to the materials that were

ordered and are being delivered The system can be set to automatically propose the

receipt quantities as the quantities that were ordered

This can be changed if receipt quantities differ from ordered

quantities



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EXERCISE MM12: CREATE AN INVOICE

RECEIPT

Vendors want to be paid for materials they have sentto the company so they send and invoice asking forthat payment

The invoice must be received by inputting thevarious data elements from the invoice into thesystem

The invoice receipt must link to the appropriatepurchase order so that the three way match can beaccomplished

Purchase Order = Goods Received = Invoice The actual payment of the invoice occurs in the FI

module at some time after the invoice verificationoccurs in MM

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