01 Org Structure MM Workflow Scenario

22/04/23 Chantal Durier © 2011 KONE Corporation

Introduction

• This document gives you a brief explanation of the Material Management Organizational Structure and of some of the MM processes that are used in a Frontline organization.


Company code and plant

• Company code represents one legal entity in SAP.

• The plant is a subdivision within a legal entity and provides materials &/or services for the business.

• Storage Locations are linked to a plant. • Inventory valuation is maintained at this level.


Storage location

• Storage location is a subdivision of a plant, for storing any type of materials (E.g. work-in-progress, components, or fixed assets.

• Entry for material master record.• Each Storage location has its own address and can be used as

a delivery point when purchasing materials.• Affects physical inventory/cycle counting and material

movement.


Purchase organisation

• Purchase organization is an organisational unit in Logistics, responsible for procuring materials & services, negotiates terms and conditions with vendors.

• Responsible for purchasing transactions including invoice verification.

• Required entry for all purchase orders.


Purchasing group

• Purchasing group is an organizational unit in Logistics, responsible for purchasing.

• Is the point of contact for the business with the vendor.• Mandatory entry for purchase requisition and purchase

order.• One purchasing group related to the business (NEB, SEB,

TRB,V5)


Material Management Overview

Purchase requisition

- Manual

- MRP

Purchase order

Purchase order follow - up

Goods receipt

Invoice verification

Invoice payment

Transfer to stock location(Central warehouse,

van`s, branches)

Vendor selection

Finance

Materials Requirements

Planning

Purchasing

Inventory management


Purchase Requisition

• Purchase requisition is a request not a purchase order.

• Can be created manually or automatically and contains the following:

• What is being requisitioned? Material / service

• How many? Quantity

• When is it needed? Delivery date

• Where will it be delivered? Plant, storage location

• How much? Price

• Which account? GL account – link to FI

• Purchase requisition details are copied into a purchase order.

• A purchase requisition may have to go through a release procedure in order to be converted into a purchase order, depending on the value.


Vendor

• It is up to purchasing to determine a vendor for this requisition.

• In SAP, the purchasing department has several options: source lists, purchasing info records (material-vendor records), supplier agreements, and vendor master records.

• A vendor may also be selected based on price quotations attained by the purchasing department.


Purchase Order

• A purchase order may now be created from the purchase requisition.

• The information entered in the purchase requisition is copied to the purchase order, plus the vendor has to be specified.

• For KONE materials the purchase order follow-up may include further amendments, such as price, quantity, or delivery date changes.


Vendor Confirmation

• In Purchasing, the term Confirmation is an umbrella term for various kinds of information provided by a vendor to a customer with regard to ordered goods.

• You can enter incoming vendor confirmations manually. Alternatively, you can receive them via EDI and have them processed automatically.

• Used to confirm the receipt of acknowledgment or confirmed dates and quantities.


Goods receipt

• A goods receipt for the purchase order is now entered. • A goods receipt will create an accounting entry. • This accounting entry will typically be against a

stock/service/sales order account and a clearing account. • Note, goods issues and transfers are functions of material

management and both will create account postings.


Invoice Verification against a PO

• Invoice verification is the process of determining whether an invoice matches what was received.

• The account entries made upon invoice receipt will typically be against the clearing account posted and the vendor’s account.

• The invoice may be blocked for payment for various reasons (e.g. invoiced too early, wrong quantity).


Invoice Payment (FI)

• Invoice payment is done by A/P, outside of MM.• This is done with payment programs where A/P clerks have

the ability to select which vendors to pay and whether or not to block payments.

• The account postings for payment are typically against the vendor’s account.


Master data in SAP

• In the following picture, you will see which of the master data is maintained globally and/or locally and which of the master data is shared for both.

• However it is useful to keep in mind that Material Master Data cleaning is also an important part of maintaining the data and reducing unwanted and unnecessary data from burdening the R/3 System.


Master Data

Complete Local

Primary Cost elements

Internal KONE Customers

External Vendor master

External Customer Master

Source list

Info records

Equipment master

Output /Price list /Agreements

Project / Networks

Routings

Work centers

Cost centers

Profit centers

Local / Global Shared Data

Global

Secondary costelements

Bill of material

VC-Dependencies

VC-Class / Characteristics

VC-Config Profile

Material master

Activities

Internal KONEVendors

Chart of Accounts


Procurement Process


Procurement Process

• The procurement process begins with creating master data.

• The vendor master record is required for procurement.

• The material master record, info record and source list greatly automate the process.

• The document flow begins with the Requisition.


Procurement Process

• This is greatly simplified by the use of material masters, but can also be improved by using the following master data:

• Vendor (supplier) master data – this holds all the relevant information from the vendor for example, address, telephone and fax number, contact name.

• The material master and vendor master can be linked to create Info record and Source list.

• Info record – will default purchasing information such as the current price and delivery time.


Procurement Process

• Source list – is an approved vendor list. Information can be “locked” so that the material can only be purchased from a specific vendor.

• This information is defaulted onto a Purchase Requisition.• This is then selected by a buyer and converted into a

Purchase Order.• The PO can be sent manually or automatically by fax, E-mail

or KONE internal by IDOC


Procurement Process

• When the goods are delivered, a Goods Receipt has to be performed which acknowledges the delivery of the material.

• When the Invoice is received from the vendor, the purchase order and goods receipt information is then matched against the vendor invoice.


Material Requirement Planning

• The main function of material requirements planning (MRP) is to guarantee material availability.

• It is used to procure the requirement quantities on time both for internal purposes and for sales and distribution.

• This process involves the monitoring of stocks and the automatic creation of procurement proposals (purchase requisitions) for purchasing.

• In doing so, MRP tries to strike the best possible balance between:

• optimising the service level and • minimizing costs and capital lockup.


MRP – HOW IT WORKS

MRPMATERIAL 1

MATERIAL 2

MATERIAL 3

AVAILABLE

AVAILABLE

NOT AVAILABLE

SALES / SERVICE ORDER

REQUIREMENTREQUISITION

PURCHASE ORDER


Stock Replenishment

Stock issued to a service order

Stock falls below re-order point

Requisition created via MRP

Purchase order created from requisition

Delivery & goods receipt direct into stock

Van 1

Customer

Van 3

Van 2

Branch / extra van / country warehouse


Questions

Questions ?Questions ?

01 Org Structure MM Workflow Scenario

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