MELJUN CORTES Material Management Organizational Structure

Material Management(MM)

- Organizational Structures -

Unit 4

January 2008© SAP AG - University Alliances and The

Rushmore Group, LLC 2008. All rights reserved.

2

Business Process Integration

MM

Org

Dat

a



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Organizational Data

• A hierarchy in which the organizational units in an enterprise are arranged according to tasks and functions

• Are static data and are rarely changed

• The definition of organization units is a fundamental step, it is a critical factor in how the company will be structured



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R/3

FIFinancialAccounting

COControlling

PSProjectSystemWF

WorkflowISIndustrySolutions

MMMaterials Mgmt.

HRHumanResources

SDSales and Distribution

PPProductionPlanning

QMQualityMgmt.PM

Plant Maintenance

SMServiceMgmt.

Client / ServerIntegrated BusinessSolution

ECEnterpriseControlling

AMFixed AssetsMgmt.

Materials Management (MM)



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Unit 4 – Overview

• Unit Concept• Purchasing and SAP R/3• Procurement Process• Organizational Structures• Organizational Relationships• Warehouse Management



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Unit Concept

• The purchasing process involves the acquisition of goods and services to support the creation of goods and services in the organization

• In this unit the structure required for the purchasing process is presented



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Purchasing and SAP R/3

• The purchasing process exists in the Materials Management (MM) module of SAP R/3 and Finance (FI) module

• The structure includes elements of the Materials Management (MM) and Finance (FI) modules

• Master data for the purchasing process exists in the (MM) and (FI) modules

• The purchasing process can and does interface with the Production Planning (PP), Warehouse Management (WM), and Quality Management (QM) modules



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Components of Materials Management

MaterialsManagement(MM)

LogisticsInvoiceVerification

MaterialMaster

PhysicalInventory

Valuation

MRP

ServiceEntrySheet

ServiceMaster

ProductCatalogPurchasing

InventoryMgmt.

ForeignTrade/Customs



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Procurement Process (Procure-to-Pay)

Purchase Requisition

Paymentto Vendor

Notify Vendor

VendorShipment

InvoiceReceipt Goods

Receipt

Purchase Order

3-WayMatch



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Organizational Structures

• Plant• Valuation Area• Storage Locations• Purchasing Organizations• Purchasing Groups



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Plant

• Lowest valuation area• Organizational level where Material

Requirements (MRP) runs• Generally used to describe a production site, a

distribution center or centralized warehouse• May be a physical or logical unit• Can be a factory, a warehouse, a regional

distribution center, a service center, or an office.

Plant

• a part of a building, an entire building, or a collection of buildings

• A single building can house multiple plants• A company code can have multiple plants• A plant can belong to only one company code

Ex. Coca-Cola Enterprises

Coca-cola enterprises provides us with a good example of a company that has several types of plants. It operates factories that produce both raw materials and finished goods. Some factories produce the syrup that forms the basis of the Coca-Cola products you are familiar with. Other factories combine the syrup with carbonated water during the bottling process to make the finished Coca-Cola products.

Ex. Coca-Cola Enterprises

• The finished goods which consists of cases of bottles and cans of Coca-Cola products, are then shipped to regional distribution centers for storage until they are transported to end customers, such as retailers. The syrup factory, the bottling factory, and the distribution center are all considered plants in Coca-Cola’s SAP ERP system.

Source: Coca-Cola Company Reports and CCE CIO presentation at SAP Sapphire 2008



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Valuation Area

• The valuation area determines at which level a material is valuated (inventory value is established)

• SAP R/3 allows valuation at the company code or plant level, but recommends valuation area be set at the plant level



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Storage Location

• Subdivision of a plant • Where materials are managed (inventory

management)/where stock is physically kept– Raw Materials– Maintenance, Repair, and Other (MRO)– Finished Product

• May be a physical or logical unit• A plant can have multiple storage locations

Storage Location

• Specific storage locations may include:– Shelves, bins, cabinets, trays, hanger

• A plant must have at least 1 storage location if it needs to track the quantity and value of materials in its inventory.



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Organizational Relationships

• Plant/Storage Location

Storage Location20 - Quality

Storage Location10 - Inventory

Plant P001



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Purchasing Organization

• Organizational unit responsible for the procurement of materials and services.

• SAP requires that purchasing organizations be assigned at the plant level

• A purchasing organization can be assigned to more than one plant

• A purchasing organization can be assigned to a company code



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• Plant/Purchasing Organization (1)

One plant – multiple purchasing organizations

Purchasing Organization – P002


Plant P001




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Each plant has its own purchasing organization


Plant P002


Plant P001

Organizational Relationships (Continued)



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One purchasing organization for multiple plants

Plant – P002Plant – P001


Organizational Relationships (Continued)



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Organizational Relationships(continued)


One purchasing organization for multiple company codes

Company CodeC002

Company CodeC001





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Purchasing Group

• Responsible for specified purchasing activities• Often used to identify individual buyers• Used for reporting



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• Purchasing Organization/Purchasing Group

Purchasing Group002

Purchasing Group001




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Organizational Structure


Company CodeC001

Storage Location20 - Quality

Storage Location10 - Inventory

Plant P001

Purchasing Group001

Ex. Dell and Intel

• Dell Computers and Intel Corporation illustrate how purchasing organization manage both local and global procurement strategies. Dell has manufacturing facilities in the United States, Brazil, Ireland, Poland, China, Malaysia, and India. The company purchases vast quantities of Intel microprocessors for its various computer product lines (laptops, desktops, and servers).

• In turn, Intel maintains a dedicated sales force at Dell’s headquarters to negotiate purchasing contracts and manage the relationship. Dell has a central purchasing organization that consolidates procurement requirements globally and negotiates pricing centrally with Intel. However, the actual purchase orders are created t the local Dell Manufacturing facilities in each region.

• In other words, Dell US purchases chips from Intel US, Dell China purchases chips from Intel China, and so on. All purchases are based on global contract and pricing terms negotiated between Dell and Intel headquarters, but they are executed locally by the purchasing groups for the various plants. This arrangement ensures that Dell receives the best pricing and terms due to the aggregate demand and strategic oversight of the centralized purchasing organization.

• At the same time, however, the local manufacturing facilities maintain control over the tactical purchasing activities because the purchasing organization is located on the same premises. Intel also benefits from this arrangement by gaining global visibility into Dell’s purchasing so that the company can better adjust their manufacturing capacity to provide the right amount of chips to Dell when and where they are needed.



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Warehouse Management

• Not required for the purchasing functionality of SAP R/3

• A separate module in the SAP R/3 environment

• Many functions and elements can be performed outside of the module



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Warehouse Management Elements

• Receiving, identifying and sorting goods• Placing goods into storage bins• Taking inventory• Monitoring and inspecting goods in storage• Preplanning distribution of materials• Picking and accumulating orders• Packaging, loading and shipping goods



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Warehouse Management Relationships

Inventory Management(MM)

Warehouse Management (WM)

Company Code

Plant

Storage Loc.

Warehouse

Aisle

Storage Rack

Quantity



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Unit 4 – Exercises

28. Verify Valuation Area29. Define Plant (P_ _ _)30. Define Storage Locations for Inventory and Quality31. Define Purchasing Organization32. Create Purchasing Groups 33. Assign Plant to Company Code34. Assign Purchasing Organization to Company Code35. Assign Purchasing Organization to Plant36. Setup Parameter ID

Company CodeC002

Company CodeC001




Plant P002


Plant P001

MELJUN CORTES Material Management Organizational Structure

Documents

rushmore group

sap sapphire

company codeor plant

thebottling process

thepurchasing process

finished goods

cocacola company reports

finished cocacola products