Systems Application & Product in Data Processing

Materials Management Module

System Landscape
Landscape is like a server system or like a layout of the servers or some may even call it the architecture
of the server’s viz. SAP is divided into three different landscape DEV, QAS and PRD.

In summary: 
Landscape: is the arrangement for the servers
IDES: is purely for education purpose and is NOT INCLUDED in the landscape. 

DEVELOPMENT ---> QUALITY ----> PRODUCTION 

DEVELOPMENT: is where the consultants do the customization as per the company's requirement.   
QUALITY: is where the core team members and other members test the customization. 
PRODUCTION: is where the live data of the company is recorded.  

A request will flow from Dev -> Qual -> Prod and not backwards.
1. Development Server: - Once the BBP gets signed off, the configuration is done is development
server and saved in workbench requests, to be transported to Production server.
2. Quality Server: - Test the customization by project team and business users.
3. Production Server: This is the last/ most refined client where the user will work after project GO
LIVE. Any changes/ new development is done is development client and the request is
transported to production.
These three are landscape of any Company. They organized their office in these three way. Developer
develop their program in Development server and then transport it to test server. In testing server
tester check/test the program and then transport it to Production Server. Later it will deploy to client
from production server.

Example below for other landscape.

Regression System is to do regression testing (otherwise called as negative testing)

Negative Testing – Whenever a new change is moving to existing live system running with business
transaction, testing to be performed to ensure the new change won’t impact the existing business
process.
SAP R/3 (Real Time 3-Tier Architecture)

Presentation Server- Where SAP GUI have. 

Application Server - Where SAP Installed. 
Database Server - Where Database installed.

Enterprise Structure

Enterprise structure defines various levels in an organization. These levels are placed according to some
hierarchy. Each level has some specific functionality associated with it, which in a combined way
describes the working of an organization. Also enterprise structure defines various organizational units
that are present in an enterprise. The Organizational Structure in MM consists of following
Organizational Levels:

 Client

 Company Code

 Plant

 Storage Location

 Purchasing Organization

 Purchasing Group

Following diagram is one such organizational structure which describes the levels incorporated in an
organization. Client being at the topmost, followed by multiple company code, followed by multiple
plants, plants having multiple storage location with their own or centralized purchasing organizations.
Client

The fundamental explanation of Client is as follows:

Client is a commercial organizational unit in R/3 system.

It has its own set of master data with independent table sets.

According to hierarchy, Client is at highest level in SAP system.

Data that is maintained at client level is valid for all organizational levels.

Company

Company is same as client from business point of view but company is a functional organization
element and client is a technical organization unit.

Company has to be configured by Functional Consultant (FI) and Client has to be configured by
Technical Consultant (Basis).

Company Code

The fundamental explanation of Company Code is as follows:

Within Client, Company code is the independent accounting unit.

It is a legal entity that has its own profit, loss and balance statement.

It is the smallest unit in organization for which a complete independent account set can be replicated.
Plant

The fundamental explanation of Plant is as follows:

Plant is an organizational unit within a company where activities take place. A plant will produce goods
and makes goods available for the company.

It is unit having manufacturing facility, warehouse distribution center or a regional sales office within
logistic. It subdivides an enterprise in different aspects.

Storage Location

The fundamental explanation of Storage Location is as follows:

Storage location is an organizational unit which actually differentiates between different material
stocks in a Plant.

Storage location is a place where stock is kept physically.

Plant can be consisting of multiple storage location. All data is stored at storage location level for a
particular storage location.

Purchasing Organization

The fundamental explanation of Purchasing Organization is as follows:

Purchasing Organization is an organizational unit under company or plant which is responsible for
procurement activities according to requirements. It is responsible for external Procurement.

Purchasing organization can be at client level i.e. centralized purchasing organization.

Purchasing organization can be at company or plant level i.e. company specific or plant specific

Different forms of purchasing can be described as follows:

Centralized Purchasing

Purchasing organization is not assigned to any company code it procures for all company codes
belonging to different client.

Company specific Purchasing

Purchasing organization is assigned to a company code only, Plant belonging to the company code can
purchase through this Purchasing organization.

Plant specific Purchasing

Purchasing organization is assigned to a Plant, only this specific Plant can purchase through this
Purchasing organization.

Purchasing Group

The fundamental explanation of Purchasing Group is as follows:

Purchasing group is an organizational unit which is responsible for everyday procurement activities
within an organization.

It is a buyer or group of buyer responsible for procurement activities in a purchasing organization.

Master Data

Master data is a reference data created once in a system and used for long time in business
transactions. Every functional module in SAP has its own master data to perform the transactions in a
fast manner.

Below are the master data’s used in SAP MM Module.

- Material Master
- Vendor Master
- Purchase Info Record
- Source List

Material Master

Materials are first classified based on material types since different type of material undergoes
different type of processing and have entirely different behavior in an organization.

- Raw material (ROH)

- Semi-Finished goods (HALB)
- Finished goods (FERT)
- Packaging material (VERP)
- Engineering Spare parts (ERSA)
- Operation Supplies/Consumables (HIBE)
- Services (DIEN)
- Non-Stock material (NLAG)
- Non-Valuated material (UNBW)

Control Functions of Material Types:-

1) Number Range
Range of number to be assigned for material master.
2 types of Number Range are there as below.
- Internal Number Range (Automatic Assignment)
- External Number Range (Manual Assignment)

2) Field Selection
Selection settings for each field in material master data screen. Four options are there as below.
- Required
- Optional
- Display
- Hide/Suppress

3) Procurement Control
Procurement Control of material type in terms of whether it is internally procured or external.
Three different options are there for both the procurement types as below.
- Internal/External Procurement allowed
- Internal/External Procurement allowed with warning message
- Internal/External Procurement not allowed

4) Price Control
Two types of price control are available as below.
- Standard Price (Price of the material is constant over period of time).
- Moving Average Price (Price changes according to the moving average of price in the market).

Standard Price (S)

If the price maintained in the material master and purchase order are different, when goods receipt
happens for that purchase order the inventory account gets debited with the standard price valuation
which is the price maintained in material master. Then the difference in price debited to price
difference general ledger account.

Moving Average Price (V)

If the price maintained in the material master and purchase order are different, when goods receipt
happens for that purchase order the inventory account gets debited with the purchase order price
valuation. Then the price maintained in material master gets changed automatically based on the
moving average price calculation which is mentioned below.

MAP (V) = (Existing Material Stock * Existing Material Price) + (New Material Stock * New Price in PO)
Existing Material Stock + New Material Stock
5) Account Category Reference
Account Category Reference is a grouping of Valuation Classes for the purpose of automatic
account determination.
Valuation Class is a grouping of similar account related materials for the purpose of automatic
account determination.
Material Type gets assigned to Account Category Reference and it is 1:1 assignment.
Account Category Reference in turn gets assigned to Valuation Classes and it is 1:n assignment.
Valuation Classes gets assigned to GL Accounts. 1:n based on type of transaction the material
undergoes. Eg. Goods Receipt, Goods Issue, Transfer Posting, etc..
Account Category Reference for ROH Material Type in standard SAP is 0001.

Material Type Account Category Reference  Valuation Class 1, Valuation 2, VC3 GL Accounts
1:1:N:N

6) Valuation
Valuation is nothing but the process of evaluating the material. Normally in SAP, the valuation is
the product of material’s quantity and unit price.
Unit price of material would be different for different location logically. So SAP determines the unit
price based on plant.
Valuation level is Plant in SAP.
Material Master Views

1) Basic Data 1
2) Basic Data 2
3) Classification
4) Purchasing
5) Purchase Order Text
6) Plant/General Storage Data1
7) Plant/General Storage Data2
8) Quality Management
9) Warehouse Management1
10) Warehouse Management2
11) Accounting1
12) Accounting2
13) Costing1
14) Costing2
15) MRP1
16) MRP2
17) MRP3
18) MRP4
19) Sales1
20) Sales2
21) Sales/General Data
22) Sales Text
23) Work Scheduling
24) Foreign Trade (Import)
25) Foreign Trade (Export)
26) Production Resources/Tools
27) Plant Data
28) Storage Location Data
29) Forecasting

For RM, we should maintain 1, 2, 4, 5, 6, 7, 11, 12, 13 and 14.

For FG, we should maintain 1, 2, 6, 7, 19, 20, 21 & 22

Vendor Master

Vendor = Supplier = Creditor (FI Terminology)

1) General Data – Name of the Vendor, Address, Ph. No,… etc. (Maintained at client level)
2) Company Code – All accounting related information,… Bank A/C No., Bank Code, etc. (Maintained
at company code level)
3) Purchasing Data – Terms & Conditions of purchase (Maintained at purchasing organization level)

Vendor Roles/Partner Roles/Business Partner:-

SAIL HO  Delhi  Main Vendor

SAIL SO  Mumbai  Ordering Address

SAIL Go down  Gujarat  Goods Supplier

SAIL Regional Office  Hyderabad  Invoice Presented by

SAIL Southern Branch Office  Chennai  Alternate Payee

For small vendors, everything will be done by main vendor.

Vendor Account Groups:-

Vendors are classified by using Vendor Account groups. (Similar to material type in material master)

0001 – Main Vendor

0002 – Goods Supplier

0003 – Alternate Payee

0004 – Invoice Presented by

0005 – Forwarding Agent/Freight Vendor

0006 – Ordering Address

0007 – Plants
CPD – One time vendor

Control Data of Vendor Account Groups:-

1) Number Ranges – Internal & External

Need to select the external check box in the number range maintenance.
2) Screen Layout/Field Selection
Based on customer requirement, we can change the field selection.
- Mandatory
- Optional
- Display
- Hide/Suppress
3) Partner Roles
VN – Main Vendor
GS – Goods Supplier
OA – Ordering Address

General Data – Created by FI or MM

Company Code Data – Created by FI

Purchasing Data – Created by MM

Authorization Matrix

Transaction Code General Data Company Code Data Purchasing Data

FK01 YES YES NO

MK01 YES NO YES

XK01 YES YES YES

Transaction Codes
XK02 – Change Vendor

XK03 – Display Vendor

XK04 – Changes (History of Changes)

XK05 – Block

XK07 – Account Group Change

MKVZ – List of Vendors

Purchase Info Record

It is purchasing master data created by purchasing department in combination with material and
vendor for a purchasing organization in a plant with reference to info category.

Info Category – It represents the type of procurement.

Standard Info Category(s) available in SAP are below.

- Standard
- Sub-Contracting
- Consignment
- Pipeline

Info record is useful for buyer to create the purchase order easily.

The main info stored in info record is price or conditions.

Price

1) Gross Price – Basic Price of a material for a unit.

2) Net Price – Gross Price + Applicable discounts & Surcharges (Taxes)
3) Effective Price – Net Price + Applicable provisions (loading/unloading charges, Freight charge,
Insurance)

In SAP, pricing elements are called as Condition types (SAP Terminology)

Standard condition types in SAP are

PB00 – Gross Price (Automatic)

PBXX – Gross Price (Manual) – Info record is not maintained, enter the price manually in PO

RA01 – Discount % on gross price

ZA01 – Surcharge % on gross price

FRB1 – Freight (Value)

SKTO – Cash Discounts

FRA1 – Freight %

Whenever there is a contract available in the system for the same combination of material, vendor &
plant, system picks up the price of contract in PO. Not the info record price.

Info record consists of 4 types of data.

1) General data
2) Purchasing Org. Data1
3) Purchasing Org. Data2
4) Texts

Number ranges of Info record are maintained at client level (Stock & Non-Stock Material).

Transaction Codes

ME11 – Create Info Record

ME12 – Change Info Record

ME13 – Display Info Record

ME1L – List Display by vendor

ME1M – List Display by material

ME1P – List Display by price order history

Source List

List of valid or approved vendors for a material in a plant.

Buyer can fix or block a vendor for supplying a material in a plant.

If a vendor is maintained as fixed, PO will directly go to fixed vendor for automatic PO creation process.

Difference between blocking a vendor in XK05 and Source List is that this vendor is blocked for
supplying only this material to this plant.

Source List Requirement can be maintained at 2 levels.

1) Material Level – MM01/MM02 Source List check box at Purchasing view.

2) Plant Level – Source List check box for plant in configuration.
In the second case, purchasing office has to prepare source list for all the materials in plant. Very
difficult job for them. Normally they will not prefer that.

Source List doesn’t have number ranges.

System will identify by material & plant code combination.

Transaction Code
ME01 – Maintain Source List (Create, Change & Display)

Purchasing
Customer as PO SD converts to SO PPC Dept. MRP Controller  Internal/External Procurement
 Planned & Production Order for Internal and Purchase Requisition for External Procurement

Purchasing Activity starts from PR.

Item Category:-

It represents the type of procurement and it defaults certain control data for purchasing document. It is
defined with Single char ID. Item categories are available in SAP MM are standard or fixed.
_ (Blank) – Standard

K – Consignment

L – Sub Contracting

D – Service

U – Stock Transfer (Transfer from plant to plant)

S – Third Party

B – Limit/Frame/Blanket (It has validity)

T – Text (Doc. Purchasing)

Own item categories cannot be created. Fixed one has to be used.

Account Assignment Category

It differentiates whether the procurement is for stock or consumption. It can be blank if procurement is
for stock and it should be maintained with appropriate account if procurement is for consumption.

_ (Blank) – Stock Item

K – Cost Center

F – Order

A – Asset

P – Project

C – Sales Order

U – Unknown

X – Auxiliary
Account assignment is a Single character ID. Own account assignment categories can be defined.

Classification of Purchasing documents

1) Purchasing Requisition (PR) – Internal Purchasing Document

2) Request for Quotation (RFQ) – External Purchasing Document
3) Purchase Order (PO) – External Purchasing Document
4) Long term agreements – Contract & Scheduling Agreement (External Purchasing Documents)

Document Category

Purchasing documents are identified with document category. It is a single character ID. Own document
categories cannot be defined.

Document Category

B – Purchase Requisition (PR)

A – Request for Quotation (RFQ)

F – Purchase Order (PO)

K – Contract

L – Scheduling Agreement

Document Types

Purchasing documents are further classified by using document types. It is defined with 4 character ID.
Own document types can be configured. Document types of purchasing topic will be discussed in the
later topics.

Document Structure/Layout:-

Every purchasing document is divided into three parts.

1) Header
2) Item Overview
3) Item Details
Header of purchasing document contains common information related to all items. Ex. Company Code,
Vendor, Purchasing Organization, etc.

Item Overview contains the overview of all line items in a document. Ex. Material, Quantity, Net Price,
Plant, reference doc, etc.

Item Details contains more detail about each line item in a purchasing document. Ex. Delivery
Tolerance, Tax Code, GR-Based IV check box, delivery schedule, etc.

Common Configurations for all Purchasing Documents:-

1) Document Type Control Data

i) Item Intervals/Serial Number
ii) Number ranges – Internal/External
iii) Field Selection – Mandatory/Optional/Display/Hide
iv) Allowed Item Categories
v) Link other Purchasing Docs
2) Texts
i) Header Texts (Header Text, Header Note, Contractual Conditions, Shipping Instructions,
etc.)
ii) Item Texts (Material PO Text, Info Record Note, Item Note, Remarks, etc.)

More text types can be configured as per the customer requirement.

3) Release Procedure
Approval of proposed expenditure which will be done by higher authority.
i) Without Classification
ii) With Classification

Item level release is possible for PR documents.

Header level is possible for all purchasing documents.

4) Define Archiving
i) One Step Archiving
ii) Tow Step Archiving
Transaction Code – SARA
Purchasing Requisition:-

It is an internal purchasing document created by users of user departments, requesting the purchasing
departments for supply of goods or services as per the specified quantities & dates.

Document Category – B

Document Types

NB – Standard Purchase Requisition

FO – Framework Requisition

RV – Outline Agreement Requisition

Transaction Code

ME51N – Create Purchase Requisition

ME52N – Change Purchase Requisition

ME53N – Display Purchase Requisition

ME5A – List Display of Purchase Requisitions

Request for Quotation

It is an external purchasing document created by purchasing department with or without referring to

other documents requesting the vendors to submit their terms and conditions as per the specified
quantities of materials or services or dates.

Document Category: A

Document Types

AN – Request for Quotation

AB – Global Purchasing Bid

Scenarios for creating RFQ

1) New material requirement

2) Procurement gap is more
3) Price Fluctuations
4) New Projects

Information in RFQ

1) Material
2) Quantity
3) Delivery Date
4) Specification
5) Deadline

Global Purchasing Bid is not normally used for material, it can be used for project works like
construction, etc.

Quotation is not mandatory for PO creation. In PO without RFQ, price will be taken from Info Records
and not from material master.

Transaction Code

ME41 – Create RFQ

ME42 – Change RFQ

ME43 – Display RFQ

ME9A – RFQ Print

For getting soft copy of RFQ in PDF file, go to SE38 transaction code and enter program name
RSTXPDFT4 and then execute.
Way to get spool number to enter in selection screen.

1) Check the spool number from processing log of output type triggered and maintain this spool
number in the selection screen of this report.
2) SP01 transaction code.

ME47 – Maintain Quotation

Quotation doesn’t have any number, it will be saved w.r.to RFQ numbers.

ME49 – Price Comparison

ME4L – List display by Vendor

ME4M – List display by Material

Purchase Order

It is an external purchasing document created by purchasing department with or without referring to

other documents confirming the vendors for supply of goods or services.

Purchase orders have legal validity

Document Category: F

Document Types

NB – Standard Purchase Order

FO – Framework Purchase Order

UB – Stock Transport Purchase Order

Types of Purchase Order

1) Standard PO
2) Subcontracting PO
3) Consignment PO
 4) Third Party PO
5) Stock Transfer PO
6) Framework/Blanket PO

1) Standard PO

PR  RFQ/Quotation  PO (Item Category Blank)  Goods Receipt (Inventorise) Invoice Receipt

2) Subcontracting PO

PR  RFQ/Quotation  PO (Item Category L)  Goods Issue of Components Goods Receipt of Final

Product Invoice Receipt

BOM – Bill of Materials – List of Components used for producing one unit of finish or semi-finished
product.

CS01 – Create BOM

CS02 – Change BOM

CS03 – Display BOM

Price mentioned is only service or assembly charge and not material charge.

Material code will be the finished product code.

3) Consignment PO

PR  RFQ/Quotation  PO (Item Category K)  Goods Receipt (Vendor Stock) Invoice Receipt

However we can consider it as available stock for further planning.

Price cannot be entered in Consignment PO.

For Price, Info Record

- Material
- Vendor
- Purchase Org (Std. Purch. Org)
- Plant

Info Category – Consignment

In GR,

If Price is Standard, it will be picked from Material Master

If Price is V, it will pick from Info Record.

4) Third Party PO
Third Party PO are integrated with SD modules.
Trading – Meeting the customer requirements without manufacturing (Procuring & Selling).

Two scenarios in trading

i) Trader will procure the materials from vendors and maintain stock at his premises.
Whenever customer order is there, they will supply from the stocks available. This is not
a third party scenario.
ii) Trader gets the order from customer and places purchase order on vendors and asks
the vendor to supply directly to customer. He is not going to maintain any stocks in his
premises. It is called direct shipping.

Third Party – Supplying the material to customer of a customer.

Process of 3Rd Party Orders:-

i) Sales Department – Create Sales Order with Item Category TAS (Third Party). When the
Sales Order is saved, system generates PR in the background with Item Category “S” and
account assignment category as “X” (Auxiliary) and delivery address as customer address.
ii) Purchasing Department – Converts the PR to PO, system copies the Item Category “S” &
Account Assignment Category “X” automatically from PR and deliver the material at
customer place.
iii) Vendor will supply the materials to customer as per the quantities & dates specified at
customer place as given in PO. Based on the confirmation given by the vendor, we can
statistical Goods Receipt in system, however it is not mandatory.
iv) - Billing is based on ordered quantity, SD can directly raise invoice without receiving invoice
from the vendor also.
 – Billing is based on delivered quantity, vendor invoice should be posted in the system
initially, and then only we can raise invoice on customer.

SD resource required to perform this scenario in system.

5) Stock Transport Purchase Order:-

Movement of materials within our plants.
i) Stock Transfer from Plant to Plant in One Step (301)
In this scenario, there is no need to create any Purchase Order.
By executing a transaction in inventory management, this scenario can be achieved. The
price of a material in source plant or supply plant will be same as receiving plant. This
scenario is applicable when both the plants are in same premises. Valuation will be
price of receiving plant.
ii) Stock Transfer from Plant to Plant in in Two Steps (303, 305)
This scenario is applicable when both the plants are in different premises. 303
movement type is for stock removal from supplying plant and 305 is movement type for
stock placement in receiving plant. In both the scenarios, it is not possible to capture
the transportation charges in the system, it will be directly booked in Finance.
iii) Stock Transfer from Plant to Plant – Without Delivery and Without Billing (351,101)
This scenario is with a creation of purchase order. PO Item Category should be “U” &
Document Type should be “UB”. 351 movement type is for stock removal from
supplying plant and 101 movement type for stock placement in receiving plant. It is
purely MM module specific process and not integrated with SD.
iv) Stock Transfer from Plant to Plant – With Delivery and Without Billing (641, 101)
It is otherwise called as Intra Stock Transfer Scenario. Purchase Order Item Category
should be U and Document Type should be UB. Supplying Plant SD team to create
outbound delivery with reference to this purchase order which delivery type would be
“NL” (Replenishment Delivery). 641 movement type is for stock removal from supplying
plant and 101 movement type for stock placement in receiving plant. This scenario is
applicable only if both the plant belongs to same company code.
Process Flow is Purchase Order (PO) – Outbound Delivery (OBD) – Post Goods Issue
(PGI) – Goods Receipt (GR)
v) Stock Transfer from Plant to Plant – With Delivery & Billing (Transfer from Company
Code to Company Code)
This is otherwise called as Inter Company Stock Transport Scenario or Inter Company
Sales Scenario.
 This scenario is same as creating PO to vendor for supplying a material to a customer.
In this scenario, the supplying plan can dictate the prices.
Supply Plant deliver the material with NLCC – Cross Company Replenishment Delivery.

To execute, Inter Company Stock Transport Scenarios, cross company clearing account
must be configured in FI Module in OBYA transaction code.
This is three module integrated process which is MM – SD – FI.
Item Category of Purchase Order should be blank and Document Type should be “NB”.
Process Flow is Purchase Order (PO) – Outbound Delivery (OBD) – Post Goods Issue
(PGI) – Billing – Goods Receipt (GR) – Invoice Receipt (IR)
To execute 4th & 5th scenarios, some mandatory master data prerequisites to be
maintained in the system.
1) Material Master should be maintained in both the plants.
2) In Supplying Plant, Material Master should have Sales view.
3) In Receiving Plant, Material Master should have Purchasing view.
4) Supplying Plant should be created as a vendor in receiving plant purchase
organization by using vendor account group (0007 – Plants)
While creating vendor master, in purchasing data screen, in the menu “Additional
Purchasing Data” tab, delivering plant code to be maintained.
5) For Supplying Plant, Sales Organization, Distribution Channel & Division to be
assigned. We should also assign shipping point to supplying plant. Sales Area is a
combination of Sales Organization, Distribution Channel & Division.
6) Receiving Plant should be created as a customer in Supplying Plant Sales Area by
using transaction code XD01 and customer account group 0001 (Sold to Party).

Transaction Codes

1) ME21N – Create Purchase Order

2) ME22N – Change Purchase Order
3) ME23N – Display Purchase Order
4) ME29N – Release Purchase Order
5) ME2M – List Display of PO by Material
6) ME2L – List Display of PO by Vendor
7) ME9A – Print for RFQ
8) ME9F – Print for PO
Long Term Agreements

1) Contract
2) Scheduling Agreement

Contract

It is an external purchasing document created by purchasing department with or without referring to

other documents for long term supply of goods or services.

Contract is not the final document to supply goods. A release order must be issued whenever goods are
required.

Document Category – K

Document Types

DC – Distributed Contract (Contract distributed to other systems)

MK – Quantity Contract (Contract based on quantity as target)

WK – Value Contract (Contract based on value as target)

Based on the business scenarios, the contracts can also be classified as distributed contracts and
centrally agreed contracts.

1) Distributed Contract
Contract created by one R/3 system can be used by other R/3 system. It is applicable for sister
concerned business.
2) Centrally Agreed Contract
Contract will be created by central purchasing department, i.e, reference purchasing
organization. By using this contract, individual purchasing organization can issue the release
order for their respective plants.
Basic price will be mentioned in this type contract, because discounts, taxes, etc. will differ from
plant to plant of different location. We can also plant specific conditions in the contract.
Contracts can also be created by the plant specific purchasing organization.
When a contract is referred in release PO, system will pick up the contract prices only even
though info record is maintained.
 In Contracts, we can use the following additional item categories.

M – Material Unknown
W – Material Group

Material Unknown (M)

Item Category M is recommended for similar materials with the same price but different
material numbers. When you create the contract item, you enter short text, material group,
quantity and unit of measure, but no material number. This is not specified until a release order
for such a material is created against the contract.

Material Group (W)

Item Category W is recommended for materials belonging to the same material group but with
different prices. When you create contract item, you enter short text and material group but no
price. This and the material number are not entered until a release order is created against the
contract. It can be used only in value contracts.

In Contract, we can use “U” account assignment category.

While in Contract, we don’t know to whom it will go, but it is sure that it goes for direct
consumption and not for stocks. But while releasing PO, we have to enter the cost center
number.

Transaction Codes

ME31K- Create Contract

ME32K – Change Contract
ME33K – Display Contract
ME35K – Release Contract
ME3L – List Display by Vendor

Scheduling Agreement
It is an external purchasing document created by purchasing department with or without referring to
other documents for long term supply of materials.

Scheduling Agreement has legal validity.

There is no need to create release order for supply of materials but a delivery schedule should be issued
whenever material is required.

Document Category – L

Document Types

LP – Scheduling Agreement

LPA – Scheduling Agreement with Release documentation

LU – Stock Transport Scheduling Agreement

We can create scheduling agreement/delivery schedule for any number of materials.

2 type of delivery schedules

1) Just In Time Delivery Schedule (JIT) – Gap between the schedule line is minimum
Ex. November’16 requirement
01.11.2016 – 100 no.s
08.11.2016 – 150 no.s
12.11.2016 – 200 no.s
18.11.2016 – 250 no.s
22.11.2016 – 120 no.s
27.11.2016 – 250 no.s

2) Forecasting Delivery Schedule (FRC)

In a particular month, material required quantity will be proposed to vendor without
mentioning the date of that month.
Forecasting Schedules are long term requirements given to vendor for these plants.
Schedule lines can be divided into different zones. Each zone has its risk factors.
Total Schedule lines are divided into 3 following zones.
1) Firm Zone – 10 days
2) Trade Off Zone – 20 days
3) Planning Zone - > 20 days

These zones are to assess the risk involved in supplying of materials by vendors.

Zones are defined in number of days.

Delivery Schedule

Firm Zone (Risk – Material Cost + Manufacturing Cost)

28.11.2016

02.12.2016

07.12.2016

Trade off Zone (Risk – Material Cost)

12.12.2016

15.12.2016

Planning Zone (No risk for both the parties as vendor only in planning phase)

20.12.2016

25.12.2016

27.12.2016

Schedule lines are dynamic in nature.

If you see schedule lines after 10 days, trade off zone schedule line will fall into firm zone.

Delivery schedule can be created manually or automatically through planning (MRP).

Delivery schedule created manually are fixed or confirmed quantity. However we can edit
quantities in next delivery schedule.
 Delivery schedule created automatically by planning are not fixed or confirmed quantity. We
have to confirm the quantity.

Advantages of Delivery Schedules

1) Reduce Multiple PO creations

2) Reduce Ordering Cost
3) Reduce Storage Cost

Transaction Codes

ME31L – Create Scheduling Agreement

ME32L – Change Scheduling Agreement

ME33L – Display Scheduling Agreement

ME38 – Delivery Schedule

ME9L – Print

Pricing Procedure

Access Sequence

It is a search strategy in searches for a valid condition record of a condition types from a condition table.
It is defined with 4 char id. Standard access sequence for PB00 (Gross Price) is 0002.

Condition Type

It represents the pricing elements such as gross price, discount, surcharge, freight and insurance. It is
defined with 4 char id. Standard Condition Types defined in SAP are.

PB00 – Gross Price (Automatic)

PBXX – Gross Price (Manual)

RA01 – Discount % on Gross Price

ZA01 – Surcharge % on Gross Price

SKTO – Cash Discounts

FRB1 – Freight (Value)

These are standards, if we want we can create our own types.

Condition Record

The actual value of a condition type based on condition key.

Condition Table

It represents price dependency field. It stores the condition key for determination of prices.

In standard SAP, tables up to 499 are already defined, if you want to create a new table it should be
500.

It is a 3 char id.

Field Catalog

It consists of all price dependency fields. If you are going to add any new fields to it, it is called
“Extending of Field Catalog”.

Continuation to Access Sequence.

Condition Type Access Sequence Access No. Table No. Table Description Exclusive

PB00 0002 10 068 Contract

25 017 Info Record

40 025 ……..

55 …… ………

60 ……. ………

PO Price picking is by this order which is standard, we can change sequence but standard is best
practice.
Lower access number  Priority Search

This technique of determination price is condition technique.

Condition technique is used in

1) Price determination
2) Tax determination
3) Batch determination
4) Message determination (Output)

Calculations:-

Based on the inputs given by us, system calculate the prices. It is called “Calculation Schema” or
“Pricing Procedure”.

RM0000 – Pricing procedure (Big)

Account Key/Accrual Key/Transaction Key/Event Key – It is an internal processing key which

facilitates in determining automatic accounts.
 Schema Determination

1) Define Schema Group Vendor (2 Char Id – ZD & ZI)

2) Assign Schema Group Vendor to Vendor Master (Purchasing Data – Schema Group Vendor)
3) Define Schema Group Purchasing Organization (4 Char Id – ZDOM & ZIMP)
4) Assign Schema Group P.Org to P.Org (Normal)

Schema Determination

Schema Group P.Org Schema Group Vendor Pricing Procedure

ZDOM ZD ZDOMESTIC
ZIMP ZI ZIMPORT

Release Procedure

Release means approval of proposed expenditure. There are two procedures available.

1) Without Classification
2) With Classification

Item level release is possible for only Purchase Requisition document. Header level release is possible
for all purchasing documents, i.e., PR, RFQ, PO, Contract and Scheduling Agreement.

Classification:-

Central function in SAP and various classifications are available in material, sales, batch, release, etc. It is
defined as classifying the objects based on certain characteristics.

Release Terminologies:-

1) Release Conditions – It identifies the release strategy.

2) Release Strategy – It defines the process of approving the purchasing document in a sequence.
It is defined with 2 char id, maximum release codes allowed in a release strategy are 8. That is,
there shouldn’t be more than 8 people in releasing or approving the purchasing document.
3) Release Group – Grouping of authorities for the purpose of approving a purchase document. It
is defined with 2 char id. There can be any number of release codes in a group. Release group is
assigned to release strategy.
 4) Release Code – Code given to an individual authority or person. It is defined with 2 char id.
5) Release Indicator – It defines the status of purchasing document after approval by every
individual authority. It is defined with single char Id.
B  Blocked
R  Released
6) Release Pre-requisites – Sequence of approval process will be formed while defining release
prerequisites.

Purchasing Document Structure/Table Field Name - Description

Purchase Requisition CEBAN BSART - Document Type
    MATKL - Material Group
    EKORG - Purchase Organization
    WERKS - Plant
RFQ, PO, Long Term Agreements CEKKO BSART - Document Type
    MATKL - Material Group
    EKORG - Purchase Organization
    WERKS - Plant
    GNETW - Net Order Value
Service Entry Sheet CESSR LEWERT - Partial Release
    UWERT - Full Release

Some of the release configurations are not transportable, so in real time it needs to be maintained
directly in quality and production systems.

Inventory Management

Inventory = Stock

Stock = Quantity

Stock Value = Quantity * Unit Value

Inventory management deals with material movements like goods receipt, goods issue, transfer
postings, stock transfers, etc.

Types of Inventory or Stock

 1) Unrestricted Stock – Material is ok in all aspects and ready for usage.
2) Quality Inspection Stock – Materials laying with quality department for inspection and
clearance.
3) Blocked Stock – The material is rejected or scrap or sending back to vendor.
4) Restricted Stock – The material is ok in all aspects but restricted for certain purpose of usage.

Inventory management also deals with special stocks.

Special stocks means other stocks laying at our premises or our stock laying at other premises.

1) Vendor Consignment (K)

2) Customer Consignment (W)
3) Sub-Contracting Stock (O)
4) Project Stock (Q)
5) Sales Order Stock (E)
6) RTP Vendor (M)
7) RTP Customer

Material Document

In Inventory Management (IM), as an evidence of every materials movement, system generates a

document, i.e, material document. Every material document is identified with a unique document
number. Material document numbers are maintained at client level.

Accounting Document

Because of material movement, if there is any change in the value of the stock, then system generates
an accounting document in the background.

If material moved from one storage location to another storage location, material document will be
generated and accounting document will not be generated.

Accounting documents are further classified by using document types.

WE – Goods Receipt (Gross)

WA – Goods Issue

WI – Physical Inventory
WL – Goods Issue for delivery

WN – Goods Receipt (Net)

Number Ranges

In standard SAP for WE/WN: 50 series

For all others WA/WI/WL: 49 series

Accounting document number ranges maintained at company code and fiscal year level.

Controlling Document

This is used by controlling document, because of material movement, any direct consumption involved,
then system generates one controlling document in background. Ex, If GR is done with “K” account
assignment category i.e, cost center, that controlling document shows amount posted to G/L account.

In Inventory Management, all the material movements are carried out with respect to movement types.

Movement Types (3 digit numeric ID)

Reversal Movement Type = Movement Type + 1

101 – GR against PO (or) Production Order

102 – Cancellation of GR w.r.to PO

103 – GR w.r.to PO for blocked stock

105 – Release from GR blocked stock

121 – Subsequent adjustment for Sub-Contracting

122 – Return deliveries to vendor

124 – Return deliveries to vendor from GR blocked stock

161 – Returns to PO

201 – Goods Issue to Cost Center

221 – Goods Issue to Project

231 – Goods Issue to Customer order without sales (Ex. Gift to Employees)

241 – Goods Issue to Asset

251 – Goods Issue for Sales without customer order (Ex. Free Samples)

261 – Goods Issue to Order (Production Order/PM Order/Internal Order)

281 – Goods Issue to Network

301 – Stock Transfer from plant to plant in one step

303 – Stock Transfer from plant to plant in 2-step (Stock Removal)

305 – Stock Transfer from plant to plant in 2-step (Stock Placement)

Accounting document will be created in 303 doc itself and not in 305.

309 – Transfer posting from material to material subject to UoM is same

311 – Transfer posting from Sloc to Sloc in one step

313 - Transfer posting from Sloc to Sloc in two step (Removal)

315 - Transfer posting from Sloc to Sloc in two step (Placement)

321 – Transfer posting from quality inspection stock to unrestricted use stock

331 – Withdrawal of sample from QI stock

333 - Withdrawal of sample from unrestricted stock

335 - Withdrawal of sample from blocked stock

340 – Revaluation of batch (No reversal for this movement type)

341 – Change in status of batch (Available to Unavailable)

343 – Transfer posting from blocked to unrestricted stock

349 – Transfer posting from blocked to quality inspection stock

351 – Goods Issue for stock transport order (w/o delivery & w/o billing)

411 – Transfer posting of special stocks to company’s own stock

413 – Transfer posting to project stock

415 – Transfer posting to sales order stock

451 – Receipt of customer returns w/o return sale order or delivery

452 – Reversal of 451

501 – GR without PO for unrestricted stock

503 – GR without PO for quality stock

505 – GR without PO for blocked stock

511 – Receipt of free samples from vendors

521 – GR without production order to unrestricted stock

523 – GR without production order to quality stock

525 – GR without production order to blocked stock

531 – Receipt of By-Products

541 – Transfer posting from unrestricted use stock to stock of material provided to vendor (sub-
contractor)

543 – Consumption of material provided to vendor for sub-contracting

545 – Receipt of by-products from sub-contracting

551 – Scrapping from unrestricted use stock

553 – Scrapping from quality stock

555 – Scrapping from blocked stock

561 – Initial entry of stock balances to unrestricted use stock (Used in Go Live)

563 – Initial entry of stock balances to quality stock

565 – Initial entry of stock balances to blocked stock

601 – Goods Issue for delivery in Sales Order

641 – Goods Issue for STO with delivery and without billing (Intra Company STO)

643 – Goods Issue for STO with delivery and with billing (Inter Company STO)

651 – Receipt of customer returns into unrestricted use stock (with return SO & return delivery) PGR

653 - Receipt of customer returns into quality stock (with return SO & return delivery) PGR

655 - Receipt of customer returns into blocked use stock (with return SO & return delivery) PGR

Special Movement Types

701 – Physical Inventory > Book Inventory in case of unrestricted use stock

702 – Physical Inventory < Book Inventory in case of unrestricted use stock

703 – Physical Inventory > Book Inventory in case of quality stock

704 – Physical Inventory < Book Inventory in case of quality stock

711 – Physical Inventory > Book Inventory in case of blocked use stock

712 – Physical Inventory < Book Inventory in case of blocked use stock

Transaction Codes

MIGO – Goods Movement

MB01 – Create Material Document

MB02 – Change Material Document

MB03 – Display Material Document

MB1A – Goods Issue

MB1B – Transfer Posting

MB1C – Initial Entry Posting

MB21 – Create Reservation

MB22 – Change Reservation

MB23 – Display Reservation

MB25 – List of Reservations

MB51 – List of Material Docs

MB52 – Display Stock of Materials

MMBE – Stock Overview

MB5T – Display Stock in Transit

MB5B – Stock on Posting Date

Physical Inventory

Counting the physical stocks and adjusting the book stocks is called physical inventory. As per the
accounting standards, it is mandatory to carry out physical inventory process for all materials atleast
once in a fiscal year.

Various methods available for carrying out physical inventory.

1) Periodic Physical Inventory

 All the materials will be counted at the end of the financial year and book stocks are adjusted
accordingly.
2) Continuous Physical Inventory (Perfectual Physical Inventory)
Dividing the materials into different groups and counting them in different periods in a financial
year.
3) Cycle Counting Physical Inventory
For continuous moving/critical materials, Physical Inventory will be carried out more number of
times in a fiscal year.
CC Indicator
A – 12
B–6
C–4
D–2

If CC Indicator is “A” in material master, every month PI process will be carried out.
4) Inventory Sampling
All the materials will not be counted, sample areas will be identified and samples will be picked
up and counted.
This is not separate procedure, it can be adopted in 1 st or 2nd point, if materials are more.

Physical Inventory process can be carried out for our own stocks and special stocks also.

Physical Inventory
1) Create PI document with the details of all the materials to be counted. Document creation
date is today’s date whereas posting date can be later.
2) Print the PI document and handover it to respective people who is going to count the stock.
3) Block the material movements/Freeze book stocks. This should be done on counting date.
4) Count the materials physically and record the stocks in physical inventory document (hard
copy). This will be hand overed to respective people to enter data in the system.
5) Authorized personnel will enter the physical stocks data into the system w.r.to physical
inventory document data.
6) Simulate the differences and go for recounting if required.
As an evidence of recounting, system can also generate recounting document.
7) Post the differences in the system
As a result of PI posting, system generates a material document and also an accounting
document.
Transaction Codes

MI01 – Create PI document

MI02 – Change PI document

MI03 – Display PI document

MI21 – Print PI document

MI04 – Enter Count

MI20 – Difference List

MI11 – Recount transaction

MI07 – Post Difference

Valuation & Account Determination

Material Valuation

Valuation or Value = Quantity * Unit Price

Material Valuation is highly integrated with FI module since it updates GL accounts.

Features of MV

1) It allows to adjust the prices to market rates.

2) It allows for revaluation.
3) For preparation of balance sheet.

Material Valuation is controlled by system settings and material master records.

Valuation Class is a deciding factor for which GL accounts has to be posted.

Material Valuation will happen not only during GR but also during Invoice Receipt.
Example

PO – 10 No.s @ 100.00 INR, price revised to 110 INR but PO not revised

GR IR

Stock Account 1000 + 100+

GR/IR Clearing Account 1000- 1000+

Vendor Account 1100-

Difference 100 is going to stock account while IR process happens.

Valuation Structure

1) Valuation Area – Valuation Area will be maintained by CC level or Plant level. By default, it will
be in plant level in SAP.
2) Valuation Class – Grouping of similar account related materials for the purpose of automatic
account determination.
3) Valuation Category – Valuation of materials differently by using certain specific parameters. The
parameters could be based on procurement, based on origin, based on status. It is defined with
single char Id.
4) Valuation Type – This is one of the characteristics of value category

The concept of using valuation category and valuation type is called split valuation. i.e, dividing the
main stocks into sub stocks and valuating them with different prices.

We can activate separate set of valuation category and valuation types for a particular plant.

If we want to activate the split valuation, go to material master Accounting 1 view and enter the
valuation category. Price control V is mandatory. Then we go to material master again for different
valuation type to maintain different valuation prices. Price control for valuation type can be S or V.

If there are two valuation types, three accounting one views to be created for one material.

5) Material Type (Discussed already)

6) Movement Type
 For which movement type, valuation should be activated.

For eg., 101 stock account debited and GR account credited.

For account assignment PO, no valuation in GR, system will not ask for storage location and it is posted
to consumption.

Account Determination

1) Account Category Reference

Grouping of valuation classes for the purpose of automatic account determination.

2) Valuation Class
Grouping of similar account requirement materials for the purpose of automatic account
determination.
3) Valuation Grouping Code/Valuation Modifier
It is used to group the valuation area for the purpose of same account determination.
Scenarios:
i) For all plants under same cc, we can have same valuation grouping code.
ii) For different plants under same cc, we can have different valuation grouping code.
iii) For different pants under different company codes we can have same valuation
grouping code, but chart of accounts must be same for all these scenarios.
4) Transaction or Event Key (3 Char Id)
It is an internal processing key which facilitates in determining automatic accounts.
BSX – Inventory Posting
WRX – GR/IR Clearing Account
KON – Consignment Liabilities
UPF – Unplanned Freight
GBB – Off – Setting entry for inventory for inventory posting
PRD – Price Difference Account
BSV – Change in Stock Account
 For any movement type, transaction keys are assigned.
It is called as MM/FI Integration or automatic account determination.
Transaction Code – OBYC
5) Account Modifier or General Modifier
It is used to define finer accounts for a transaction/event key.
For any internal goods movement, there is an offset entry (GBB).
a) Goods Issue to cost center – BSX (minus)
GBB (plus) VBR

b) Goods Issue to scrapping – BSX (minus)

GBB (plus) VNG
c) Goods to withdrawal for samples – BSX (minus)
GBB (plus) VQP

Account Modifiers for transaction/event key GBB.

AUF – Goods Receipt for Production Order
BSA – Initial Entry of Stock Balance
INV – Income/Expenditure for inventory posting
VAX – Goods Issue for Sales
VBO – Consumption from stock of material provided to vendor
VBR – Goods Issue for internal consumption (cost center)
VNG – Goods Issue for scrapping
VQP – Goods Issue for samples
ZOB – Goods Receipt without Purchase Order
ZOF – Goods Receipt without Production Order

Account modifiers for GBB are activated and pre-configured in the system.

PRD
---- (Blank) – Goods/Invoice Receipt w.r.to PO
PRF – Goods Receipt w.r.to Production Order
PRA – Goods Issue
PRU – Transfer Posting

Account modifiers of PRD are not activated in standard SAP. If we want, we have to activate.
 KON
___ (Blank) – Consignment Liabilities
PIP – Pipeline Liabilities

Except for GBB, PRD & KON, no other transaction/event key is having account modifiers.

Account determination – 2methods

1) With Wizard
2) Without Wizard

Without Wizard

1) Define Valuation Control/Activate Valuation Grouping Code.

2) Group together valuation areas
3) Define Valuation Classes
4) Account Grouping for Movement Types

Account Grouping for Movement Types:

Movement Type  Special Stock Indicator  Value Update  Quantity Update  Movement Type
Indicator  Consumption Posting  Value String  Counter  Transaction/Event Key  Account
Modifier  Check

Value String – Bunch of possible transaction/event key

Logistics Invoice Verification

1) Invoice Verification Online

2) Invoice Parking
3) Invoice Verification in Background
4) Specific Methods of Invoice Verification
a) Evaluated Receipt Settlement
b) Subsequent/Consignment Liabilities
c) Invoicing Plan
 d) Revaluation
5) Verification of Invoices received via EDI.
1) Invoice Verification Online (T.Code – MIRO)
PO  GR  IR
99% of customers is using this in India.
2) Invoice Parking
1st level – “Save as Parked” (Generates only Invoice Doc and not Accounting doc)
2nd level – “Save as Completed” (Generates only Invoice Doc and not Accounting doc)
3rd level – “Post” (Invoice Doc and Accounting doc)

3) Invoice Verification in Background (MIRA)

In big companies, lot of invoice will come per day. To avoid this manual work which takes long
time, this option is available. Here we have to give PO & Item No. for system to verify in the
background.
4) Special Methods
a) ERS (MRRL)
Pre-requisite:- Vendor Master  Purchasing Data -> ERS Checkbox to be ticked
Without hardcopy of invoice, payment will be done.
PO  Item Details  Invoice Tab  ERS Checkbox tick
Advanced countries like Europe using this functionality.
b) Subsequent/Consignment Liabilities (MRKO)
In GR, no accounting document because it is vendor stock. Accounting document will be
created, once the stock is consumed.
c) Invoicing Plan
Paying to vendors as per the schedules of payment terms agreed.
Ex. Rental PO
d) Revaluation (Arrears)
For price revision, old PO’s created after with effective date.
5) Verification of Invoice received via EDI
If price difference is PO or GR with IR, IDOC failed message will come.
EDI settings are very costly.

By using LIV (Logistics Invoice Verification)

- Credit Memo (Deducting amount from vendor)
- Subsequent Debit (Receiving partial invoice)
- Subsequent Credit
 Debit Memo = Invoice = Bill
It is reverse of actual business language. In SAP only, Debit Memo = Bill

Transaction Codes
MIRO – Invoice Posting
MIR7 – Invoice Parking
MIR4 – Invoice Display
MR8M – Cancel Invoice
MRBR – Release Blocked Invoice
External Services Management

Service  Activity without material movement, services from external organization.

Ex. AC Maintenance, Pest Control.

Overview of Material & Service Procurement Flow

Material: PR  RFQ/Quotation  PO  GR  IR

Services: PR  RFQ/Quotation  PO (Item Cat. – D & Acc. Assign. Cat. – K)  Service Entry Sheet  IR

Services can be measured in Activity Unit (AU) as UoM.

Condition Record maintenance to be done in MEK1 transaction.

Service Master similar to Material Master

Service Category similar to Material Type

Number ranges can be maintained similarly.

Service Category (some standards in SAP)

ALL – Complete Services

GRND – Basic Services

SERV – Services, Purchasing

Number ranges are assigned to this categories. We can create our own service categories.

Release procedure can be configured for Services.

No need of configurations for 2 level release, because by default two levels are there. One will save and
other will approve. Normally 2 level will be used in companies.

Transaction Codes

Service Master – AC03 for Create, Change & Display

Service Conditions – ML33

Service Entry Sheet – ML81N