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CONTENTS
MM - Overview
MM - Purchasing
MM - Purchase Order
MM - Inventory Management
MM - Invoice Verification
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Overviewof
MATERIALS MANAGEMENT
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Target Group
Purchase department
Stores department
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Course Objectives
Visualize the MM functionalities
Maintain MM related views of Material
Master and vendor master
Create other master records or changingthe existing master records
On conclusion of this course, you should beable to:
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Introduction
Contents
MM overview
Organizational Structure
Material master
Vendor master
Other master records
Exercises
Solutions
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MM - Overview
Major components of MM- Module
materials planning and control
purchasing
inventory management
invoice verification.
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Integration with other Modules
Finance / Asset Management
Procurement
Logistics Planning
Sales Logistics
Production
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SD
FI
Integrated Business Process Overview
Requirementfor Goods /
Services
Purchase
Order
Goods
Receipt
Invoice
Verification
Financial and Managerial Reporting and Analysis
G/LInventory /
GRIR
G/L GRIR/Expense
AP Invoice
Vendor
Payment
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Organizational Elements - Client
Highest Hierarchical Level in SAP(e.g. a corporation)
Can be Used to Differentiate between a Development,Quality Assurance, and Production System within R/3
All Areas of an Organization that are to be Integratedinto the SAP R/3 Production System should be IncludedUnder one Client
Client Characteristics
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Organizational Elements - MM
Responsible for Procurement for One or MorePlants
Responsible for Negotiating Pricing and DeliveryTerms with Vendors
Purchasing Organization is Assigned to ACompany where Inventory is Legally Tracked or
Costs are Legally Incurred.
Purchasing Organization
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Organizational Elements - MM
Usually a Manufacturing Facility, Warehouse, or aLocation that Stocks , Manages, and ValuatesInventory
May be a Physical Site with Multiple
Manufacturing/Production Lines
May be Multiple Manufacturing/Production Linesat One Physical Site
Can be a Physical Location(cost centers may ormay not be associated to a plant i.e.administrative Vs. manufacturing cost centers)
SD Availability Checking is Normally Done at thePlant Level
Plant
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Organizational Elements - MM
Links to Production(PP), Materials Management(MM), and Sales and Distribution(SD)
A Plant is Assigned to A Company Purchasing Organization are Assigned to Plants
Plant (Cont.)
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Organizational Elements - MM
A Location within a Plant where Inventory isStored
Storage Location
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Master data in MM
Material Master
Vendor Master
Service Master
Purchasing info record
Source List
Vendor Excise Details
Material and Chapter ID combination
Excise Tax rate
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Material master in SAP.
The material master contains information on all thematerials that a company procures, produces, stores,and sells.
The material master is used by all components in the
SAP Logistics System Different departments in a company work with the
same material, so data in a material master record issubdivided in the form of user departments.
Material description and Base unit of measure appearin all user departments.
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Use of material master in SAP logistics systemfunctions.
In Purchasing for ordering materials.
In Inventory Management for goods movementpostings and physical inventory
In Invoice Verification for posting invoices
In FI for maintaining value of material.
In Production Planning and Control for material
requirements planning, scheduling, and workscheduling
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User departments using same material master
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Material Numbers
Definition
Number uniquely identifying a material master record,and thus a material.
Use
For every material that your company uses, you mustcreate a material master record in the material master.This record is uniquely identified by a material number.
Internal and External number assignment.
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Industry sector
It determines type of industry .
Eg. mechanical industry,chemicalindustry,pharmaceutical etc.
The industry sector you specify determines
Which screens appear and in what sequence
Which industry-specific fields appear on the individualscreens
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Material Types
Materials with the same basic attributes are groupedtogether and assigned to a material type.
When creating a material master record, you mustassign the material to a material type. The material type
determines certain attributes of the material and hasimportant control functions.
Some of the standard material types are
ROH: Raw materials which are bought from outside and goes
into production. Halb :Semi-finished material which are bought externally and
manufactured inside. They can be sold individually as well.
FERT:Finished materials are final products of the company
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Views relevant to MM
Basic data1
Purchasing
Purchase order text
Storage 1
Storage 2
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CREATING MATERIAL MASTER IN SAP
From logistics screen click
Logistics Materials Management material master, tobring up material master screen.
Click material create(general) immediately
Organizational levels.
Plant
Storage location
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Material master
In Purchasing screen you can enter
Purchasing group
purchasing value key
Set indicator for automatic PO
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Material master
In purchase order text screen,
you can enter the text , which will be defaulted in POevery time when you create a PO for this material.
In Storage 1 you can enter,
Storage bin
Unit of issue
Shelf life data
Batch management
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Concept of vendor master in SAP.
vendor master record is maintained by both Accounting andPurchasing.
A vendor can be a one time vendor or regular vendor
A vendor master record contains the vendors name andaddress, as well as data such as:
the currency used for ordering from the vendor
terms of payment names of important contact persons (sales staff)
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Organization of vendor master records
A vendor master record is subdivided into threedifferent data areas:
General Data
Company code data
Purchasing organization data
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Creating vendor master record.
Menu Path
Logistics -> Material management -> purchasing ->masterdata vendor ->purchasing ->create
In the initial screen you can enter,
Vendor number (For External number assignment )
Vendor account group
Purchasing organization
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Creating vendor master record.
In general data you can maintain,
Address
Control
Payment transactions
In Purchasing organization data you can maintain,
Purchasing Data
Partner functions
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Changing vendor master record
You cannot change Vendor account group (One timevendor cannot be converted in to a regular vendor)
Blocking a vendor
Flag for deletion
Changing other options
Automatic PO
Vendor schema group
Payment terms
Discount
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Service Master Records
Descriptions of all services that may need to beprocured can be stored.
The organizational level at which services are procuredis the purchasing organization.
In addition to a unique description of the service, aservice master record contains further information thatis necessary for procurement purposes (such as textsor units of measure).
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Service master records
You can store price information at various levels:for example, $100 per hour as the "market" or "ownestimated" price, $98 as vendor Acmes price and $105as vendor Zeniths price for service A.
The individual service master records can be groupedinto different service types (e.g. trades or activities).
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Creating a service master record
In the initial screen you can enter Service number (if external number assignment)
Service category
In the Basic data screen enter, Base unit of measure
Description of services
Valuation class (3200 for services)
In the classification screen enter,
The class for classifying the services
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Concept of Purchasing info rec in SAP.
An info record represents a material-vendorrelationship.
The info record contains concise information about a
vendor and a material that you already procure fromthat vendor.
Info records are created automatically when you order
a material. You can also create, change, and delete inforecords.
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Purchasing info rec (Contd)
Use of Purchasing info rec in PO creation Net price for the item will be defaulted in PO
All the pricing conditions will be defaulted
other uses include
Remainders
Delivery tolerance
Shelf life
Purchase order text
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Purchasing info rec (Contd)
Use of info rec in Vendor evaluation
Order price history
Quotation price history Delivery reliability
Quantity reliability
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Concept of source list in SAP
A source list specifies the possible sources of supplyfor a material over a given period of time
It shows the time period in which a material may be
ordered from a given vendor
Source list can be created automatically usinggenerate source list option
Source list can also be maintained manually.
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Source List (Contd)
Uses of source list Fixed vendor
Vendor blocking
Auto PO creation
Source list requirement at plant level
Can be made mandatory
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Master Data for India Version
Chapter ID Excise Law
Chapters, Headings and subheadings
Example 7216.10
72 - Iron and Steel
16 - Angles, shapes and sections
Material and Chapter ID combination
Material assessable value Net dealer price
Material assessable value
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Tables for excise purpose (contd..)
MODVAT Determination Input material MODVAT
output material MODVAT
Vendor Excise details
SSI Rates
Excise Tax rates
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MM - Purchasing
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Target Group
Purchase department
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Course Objectives
Understand the concepts in SAP -Purchasing component
Create or change PRs
Create, change or compare RFQs
Create contracts
On conclusion of this course you shouldbe able to
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Introduction
Contents Purchasing overview
Purchase requisitions
Request for quotations
Outline agreements
Exercises
Solutions
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Purchasing - overview
The Purchasing component has the following tasks: external procurement of materials and services
determination of possible sources of supply for a requirementidentified by the materials planning and control system
determination of possible sources of supply for a requirement arisingdirectly within a user department
monitoring of deliveries and payments to vendors
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Purchasing - integration with other modules
Integration Controlling (CO)
Purchase orders for materials intended for direct consumption
They can be directly assigned to a cost center or a production
order. Financial Accounting (FI)
Vendor master is maintained by both accounting and purchasingdepartments.
Through PO account assignment, Purchasing can also specifywhich G/L accounts are to be charged in the financial accountingsystem.
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Purchasing - integration with other modules
Sales and Distribution (SD) Within the framework of materials planning and control, a
requirement that has arisen in the Sales area can be passed onto Purchasing.
When a requisition is created, it can be directly assigned to a
sales order.
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Process flow in purchasing
Determination of Requirements Materials requirements are identified either in the user departments
or via materials planning and control.
It includes both MRP proper and the demand-based approach toinventory control.
The regular checking of stock levels of materials defined by masterrecords, use of the order-point method, and forecasting on the basisof past usage are important aspects of the demand management.
You can enter purchase requisitions yourself, or they can begenerated automatically by the materials planning and controlsystem.
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Process flow in purchasing
Source Determination The Purchasing component helps in identifying potential sources of
supply based on past orders and existing longer-term purchaseagreements.
This speeds the process of creating requests for quotation (RFQs)
Vendor Selection and Comparison of Quotations
The system is capable of simulating pricing scenarios, allowing youto compare a number of different quotations.
Rejection letters can be sent automatically.
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Process flow in purchasing
Purchase Order Processing The Purchasing system adopts information from the requisition and
the quotation to help you create a purchase order.
You can generate Pos yourself or have the system generate themautomatically.
Vendor scheduling agreements and contracts are also supported.
Purchase Order Follow-Up
The system checks the reminder periods you have specified
System automatically prints reminders or expediters at thepredefined intervals.
It provides you with an up-to-date status of all purchase requisitions,quotations, and purchase orders.
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Process flow in purchasing
Goods Receiving and Inventory Management Goods Receiving personnel can confirm the receipt of goods simply
by entering the Po number.
By specifying permissible tolerances, buyers can limit over- andunderdeliveries of ordered goods.
Invoice Verification
The system supports the checking and matching of invoices.
Invoice verification can be based on purchase orders or GRdocuments or directly to a vendor without any document
reference.
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Std. Menu options in Purchasing
Create Use this option to create a purchasing document .
Enter the required information and save the document .
The document is then stored under a unique number.
Change
Use this option to change a purchasing document .
You need the document number in order to access the document.
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Std. Menu options in Purchasing
Display Use this option to display a purchasing document .
You cannot change or add any information to the document that isdisplayed .
You need the document number in order to access the document. List displays/reporting
You can use these options to generate reports analyzing purchasingdocuments
Example List of all purchase orders for Vendor ABC
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Std. Menu options in Purchasing
Follow-on functions This option allows you to perform tasks related to (following on from)
but not included in the purchasing functionality.
Example
Entering a goods receipt or an invoice in the system.
Messages
This option enables you to print or transmit documents in messageform
Example Transmission via fax, Printouts etc
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Purchasing Documents
Definition A purchasing document is an instrument used by Purchasing to
procure materials or services.
Types of purchasing documents
Request for quotation (RFQ)
Transmits a requirement defined in a requisition for a material orservice to potential vendors .
Quotation
Contains a vendor's prices and conditions
It is the basis for vendor selection.
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Purchasing Documents
Purchase order (PO) The buying entitys request or instruction to a vendor (external
supplier) to supply certain materials or render/perform certainservices/works,
It formalises a purchase transaction .
Contract
In the SAP Purchasing component, a type of "outline agreement", orlonger-term buying arrangement .
The contract is a binding commitment to procure a certain material or
service from a vendor over a certain period of time.
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Purchasing documents
Structure Each purchasing document is subdivided into two main areas:
The header
The header contains information relevant to the whole document .
Example, information about the vendor and the document number iscontained in the document header
The individual items .
The items specify the materials or services to be procured .
Example, The material description and the order quantity are
specified in each item.
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Purchasing documents
The additional data It provides extra information about the item, and has no direct
connection with the item procurement data.
Example,
account assignment data
PO history for an item, which contains information on alreadyrecorded goods and invoice receipts relating to the item.
Classification of Purchasing Documents
Purchasing documents are differentiated in the SAP system via the
document type . Example, relevant number range depends on document types
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Purchasing documents
Document types are defined for RFQs, purchase orders, andcontracts
Numbering of purchasing documents
Each document is assigned a unique number .
This number can be assigned internally or externally , depending onthe policy .
Internal number assignment means that the system assigns thenumber.
External number assignment means that the person creating the
document must supply it. Alphanumeric assignment is only possible in the latter case.
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Purchase requisitions
Definition A purchase requisition is a request or instruction to Purchasing to
procure a certain quantity of a material so that it is available at acertain point in time.
It is an internal document.
Requisitions can be created in the following ways:
Directly: Someone from the requesting department enters a purchaserequisition manually.
Indirectly: The purchase requisition is created via another SAP
component.
Purchase requisitions can be subject to a releaseprocedure.
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Purchase requisitions - integration
Requisitions can be created indirectly in the followingways:
via materials planning and control
The component Consumption-Based Planning suggestsmaterials that need to be ordered on the basis of past
consumption or usage figures and existing stock levels.
The order quantity and the delivery date are determinedautomatically.
Materials planning and control can stipulate that a purchaserequisition is to be resubmitted to the purchasing department if ithas not been processed after a predefined period of time.
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Purchase requisitions - integration
Requisitions are generated automatically fromproduction orders if
They contain an external processing operation (e.g. subcontractingwork)
A precondition is that the control key for the operation allows or
prescribes external processing.
they contain non-stock components
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Purchase requisitions
Procurement types Standard
Subcontracting
Components to be provided can be entered.
Consignment
Stock transfer
External service
Service specifications can be entered
M l i f PR
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Manual creation of PR
Things to remember Item category
Account assignment category
Purchasing organization
Purchasing group
Requirement tracking number
Delivery date
Item with or with out material master record
Order quantity
C i R F Q i
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Creating Request For Quotation
Automatically from PR
Manually
With reference to PR
With out reference to PR
Delivery address
Address of the company asking for quotation, by default it is theaddress of E+L. But it can be changed.
vendor address
Just enter the codes of the vendor, System will take other detailsfrom vendor master.
Quotation dead line
Delivery date
RFQ ( td )
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RFQ (contd)
Printing RFQ
Send the Printed RFQ to the vendors
Receive the quotation from the vendor
Maintain the RFQ
Enter the net price quoted by the vendor
Enter the pricing conditions
Terms of payment
Update the info record if reqd
Q t ti
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Quotations
Compare the quotations Maintain the collective number in the RFQs
Quotations can be compared based on price
Discounts and delivery costs can be included
Comparison can be based on effective price also
System compares and gives the ranking list
Percentage basis for comparing quotations
Mean value equals 100%
Maximum value equals 100%
Minimum value equals 100%
O tli t ith th d
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Outline agreements with the vendor
To Setup longer-term purchasing arrangements withvendors regarding the supply of materials or theperformance of services.
Outline agreements can be subject to a release(approval or clearance) procedure.
Agreement types
Quantity contract
Value contract
O tli t
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Outline agreements
Structure Document header: containing information relating to the entire
agreement. For example, the vendor information and headerconditions are in the document header
Items: containing the information specific to the relevant material or
service. statistics on ordering activities for the item
quantity or price of the item
conditions, such as quantity discounts and surcharges
O tli t
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Outline agreements
Texts in Outline Agreements Header texts
Item texts
You can create your own text types
Creating a outline agreement
Outline agreement can be created with reference to a RFQ or withoutany reference
Important terms
Purchasing organization
Purchase group
O tli t
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Outline agreements
Target quantity
Target Value
Pricing conditions
Validity starting and ending date
Vendor address
Delivery address
Remainders
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MM - PURCHASING
Target Group
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Target Group
Purchase department
Course Objectives
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Course Objectives
Create a new PO
Make changes to existing PO
Print PO
Navigate through purchasing informationsystem
On conclusion of this course, you should beable to
Introduction
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Introduction
Contents
Creating POs
Printing of POs
Printing Remainders
Changing or canceling POs
Purchasing information
Exercises
Solutions
Purchase order
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Purchase order
Definition Formal request or instruction from a purchasing organization to a
vendor or a plant to supply or provide a certain quantity of goods orservices at or by a certain point in time.
Structure
Header
items
Additional data
Creating a Purchase order
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Creating a Purchase order
Automatically from PR Set automatic PO indicator for material and vendor
Maintain Purchasing info record
Maintain source list
Fixed vendor
PR from MRP or Manually created PR
Assign manually or automatically
Process the assigned PR to create PO
Create PO Manually
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Create PO - Manually
Manually creating a PO With reference to PR
Select the PRs
Select the items from PR
Copy the items in to PO
Enter the vendor
Enter the prices and pricing conditions
Requirement tracking number
Update the info record if reqd
Create PO
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Create PO
With reference to RFQ
Select RFQ
Select the items
Copy the selected items in to PO
Enter the Price and pricing conditions
Update the info record if reqd.
Acknowledgement and confirmations
Create PO
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Create PO
With out any reference
In this case you need to enter
Vendor code
Delivery date
Item category
Account assignment category (if reqd)
Requirement tracking number
Order type ( NB For std purchase order)
Plant ( 4000 - default plant )
Storage location
Creating a PO (contd )
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Creating a PO (contd)
Important terms in PO Vendor
For creating a PO you need to enter vendor code
Vendor master should exist for this purpose
if you dont want to maintain all the details for a vendor you cancreate a one time vendor
Item category
Standard
Subcontracting
service
Create PO (Contd )
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Create PO (Contd)
Account assignment category
Specification of the account assignment objects that are chargedin the case of a purchase order for a material that is intended fordirect usage or consumption.
Examples
Asset
Sales order
Production order
Cost center
Types of account assignment Single account assignment
Multiple account assignment
Create PO (contd )
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Create PO (contd)
Delivery date
Date format
Day format
Week format
Month format
Delivery date entered here is only expected delivery date
You can also specify a statistical delivery date
Create PO (contd )
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Create PO (contd)
Units of measure in PO
The order unit
This is the unit you specify in connection with the order quantity.
The order price unit
This is the unit that applies in connection with the net price and which istaken as the basis for invoice verification.
If the order price unit does not correspond to the order unit, and if noconversion factor is specified in the system, you must enter a conversionfactor on the item detail screen.
Create PO (Contd )
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Create PO (Contd)
Example for units of measure in PO Order quantity 24
Order unit Box
Gross price per unit $10
Order price unit (number) 1
Order price unit (of measure) kg
Conversion factor 24 boxes 1 kg
Create PO (Contd )
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Create PO (Contd)
Conditions
This component enables you to store pricing stipulations agreedwith the vendor
Examples are applicable discounts or surcharges, or stipulationsregarding the payment of freight costs in the system.
There are three kinds of price in Purchasing:
Gross price
Price without taking any possible discounts and surcharges into account
Create PO (Contd )
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Create PO (Contd)
Net price
Price taking any applicable discounts and surcharges into account
Effective price
Net price after deduction of cash discount, with allowance for anymiscellaneous provisions, delivery costs, and non-deductible taxes.
Terms of Payment
Example
Within 14 days 2% discount
Within 30 days due net
Create PO (Contd )
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Create PO (Contd)
Inco terms
Incoterms are internationally-recognized terms of deliveryreflecting the standards set by the International Chamber ofCommerce (ICC).
Example
FOB - Free On Board. This means that the buyer has to bear allcosts and risks of loss of or damage to the goods from that point.
You can specify Incoterms for an order item that differ from those inthe PO header.
Creating PO from outline agreement
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Creating PO from outline agreement
In the initial screen for Create PO, Select the Outline agreement and items
Copy the items in PO
In the item overview screen
Enter the quantity
If the quantity exceeds the target quantity system gives a warning
Texts in PO
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Texts in PO
Header texts Header note
Pricing types
Dead lines
Terms of delivery
Shipping instructions
Terms of payments
warranties
Penalties for breach of contract
Confirmations
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Confirmations
Purpose
This component can be used, if you wish to have your vendorprovide you with various kinds of confirmation regarding deliverydates and quantities
It enables you to base your materials planning and control activitieson more up-to-date data than that contained in purchase orders.
Confirmation control key
Shipping notification Order acknowledgement
Shipping notification
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Shipping notification
Shipping Notification Definition
A vendors confirmation to a purchasing organization of the delivery
date for a certain quantity of ordered materials
It can be for the date of performance of ordered services also. Structure
A shipping notification consists of several items in which the notified(confirmed) quantity of the material or service is specified.
Confirmations from the Viewpoint of IM
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Confirmations from the Viewpoint of IM
When you post goods receipts, there are several waysof finding the associated purchase orders.
Enter the PO number
Enter the shipping notification number
Enter the transport identification code
If you establish a link via the PO number itself, therelationship is unique
i.e. one goods receipt (GR) against one purchase order
Confirmations from the Viewpoint of IM
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Confirmations from the Viewpoint of IM
If you enter the number of the shipping notification The system selects all purchase orders containing this number
System suggests the notified quantities for the GR document.
Prerequisites
If you wish to match up GRs against POs via the shipping notificationnumber ,
shipping notification must exist as a separate document.
Releasing the PO
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Releasing the PO
Release Procedure for External Purchasing Documents External purchasing documents (i.e. purchasing documents other
than requisitions) are released at header level.
Item-by-item release is not possible.
These documents can only be released using the release procedurewith classification.
Release Conditions
The release conditions determine the release strategy in accordancewith which a PO is to be released.
If a PO does not meet the conditions for a release strategy, it isautomatically released for further processing.
Release procedure
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e ease p ocedu e
Release Strategy The release strategy defines the approval process for purchasing
documents.
The strategy specifies the release codes necessary and thesequence in which releases have to be effected.
A maximum of eight release codes can be defined.
The assignment of the release strategy to a purchasing document isbased on the release conditions.
Release procedure
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Release Code Definition
The release code is a two-character ID allowing a person torelease (clear, or approve) an external purchasing document.
Who may work with which release codes is basically controlledvia a system of authorizations.
Release Prerequisites
The release prerequisites indicate the sequence in which PO mustbe approved via the release codes.
Printing a PO
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Menu path Purchase order -> Header -> Messages
Data required
Output type
Medium
Communication method
Select the printer
Further Data
Repeat output
Change output
Printing the remainders
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Types of expediting letters Remainders
A negative number of days means that a reminder is to be issuedto the vendor n days prior to the delivery date
Urging letters
A positive number of days means that a letter or message urgingdelivery is to be issued n days after the due date.
Message type - MAHN (Dunning letter)
Changing and blocking POs
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If you change a PO after it has been sent to the vendor, a change
document is generated that can be sent to the vendor.
This tells the vendor what you have changed.
If the goods have already been delivered, then the changes you canmake to the PO are limited.
For example, you cannot change the quantity to one that is lessthan the quantity delivered.
If the invoice has been received or the goods have been paid for, andyour intended change affects the price, the change will be ineffective.
You can display the PO history for an item to determine whether
deliveries have been received or the item has been invoiced.
Purchasing information
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List displays List of POs for a vendor or for a range of vendors
This gives the details of the purchase order like still to bedelivered, still to be invoiced etc.
List of POs for a material or for a range of materials
List of POs for a account assignment
List of POs for a requirement tracking number
Reporting
General analyses Order value analyses
Subcontracting stocks per vendor
Purchasing information
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Material Purchasing values
Purchasing quantities
On time delivery
Qty reliability Frequencies
Vendor
Material group
Purchasing group
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MM - Inventory management
Target Group
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Purchase department
Stores department
Course Objectives
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Do planned and unplanned goods receipts
Do Issue of Goods
Do transfer posting of goods
Manage stocks of the company on bothquantity and value basis
On conclusion of this course, youshould be able to
Introduction
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Contents
Overview
Integration with other modules
Type of stocks
Concept of material documents
Goods movements
Movement type concept
Inventory management - overview
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What is inventory management ?
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SAP's Inventory Management system allows you to
manage your stocks on a quantity and value basis
The stocks are managed not only on a quantity basis but also byvalue - a prerequisite for cost accounting. With every goodsmovement, the following values are updated:
the stock value for inventory management the account assignment for cost accounting
the corresponding G/L accounts for financial accounting via automaticaccount assignment
What is inventory management ?
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Planning, Entry, and Proof of Goods Movements
Goods movements include
external movements (goods receipts from external procurement,goods issues for sales orders)
internal movements (goods receipts from production, withdrawals ofmaterial for internal purposes, stock transfers, and transfer postings).
For each goods movement a document is created which is used bythe system to update quantities and values and serves as proof ofgoods movements.
Integration with other modules
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Integration in Materials Management (MM)
As a component of Materials Management, Inventory Management isdirectly linked with Material Requirements Planning , Purchasing, andInvoice Verification.
Inventory Management forms the basis for material requirements
planning, which takes into account not only physical stocks but alsoplanned movements (requirements, receipts).
Quantities and values from the purchase order and the goods receiptdocument are checked to ensure conformity with those in the invoice.
Integration with other modules
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Integration in Production Planning (PP)
Inventory Management is closely linked to the Production Planningmodule:
Inventory Management is responsible for staging of the componentsrequired for production orders
Goods issue against production orders
The receipt of the finished products into the warehouse is posted inInventory Management.
Integration with other modules
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Integration in Sales & Distribution (SD)
As soon as you enter a sales order, you can initiate a dynamicavailability check of stocks on hand.
When the delivery is created, the quantity to be delivered is markedas "Scheduled for delivery."It is deducted from the total stock when
the goods issue is posted. It is also possible to create sales order stocks.
These SD transactions are depicted in the Sales & Distributionsystem.
Integration with other modules
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Integration in Quality Management (QM)
In the case of a goods movement, the system determines whetherthe material is subject to an inspection operation.
If so, a corresponding activity is initiated for the movement in theQuality Management system.
Financial Accounting (FI)
Automatic account assignment, a procedure during which the systemdetermines the accounts relevant for the given goods movements.
Integration with other modules
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Controlling (CO)
The interface to the cost accounting system is activated in thecase of material consumption
For example, when materials are issued for various accountassignment objects such as orders or cost centers.
Cost accounting is also involved when goods receipts areassigned directly to cost centers or orders.
IM - Material Master
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Relevant views
Accounting
Price and accounting information.
Examples:
type of price control valuation class.
Materials Planning
Information for materials planning.
Examples:
safety stock, reorder level, availability check.
IM - Material Master
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Purchasing
Procurement information for a material.
Examples:
overdelivery and underdelivery tolerances
purchasing order unit of measure (order unit).
Storage Information for warehousing and storing the material.
Example:
unit of issue
storage conditions, fixed bin location
IM - Material Master
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Quality Management
Information for sampling and inspecting a material.
Examples:
indicator for goods receipt via quality inspection
Work Scheduling
Information for producing the material.
Examples:
production unit
overdelivery and underdelivery tolerances allowed.
IM - Data Required
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For Inventory Management, you must maintain thefollowing data:
Plant data
This data can be maintained via different views (for example, viaPurchasing, Storage, Work scheduling).
You have to maintain at least one view that requires the entry ofthe organizational level plant.
Valuation data
Valuation data is required for managing the stock by value.
You maintain this data via the Accounting view.
IM - Data Required
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Storage location data
You maintain the storage location data via the Storage view.
If a material is located in a storage location, the storage data forthat storage location must exist in the material master record, sothat the system can manage the stock quantities at storage-location level.
Storage data can be manually entered when the material masterrecord is created
It can be automatically created during the first goods movement inthat storage location.
Types of stocks
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Total valuated stock
Sum of all valuated stocks of a material.
It consists of all the types of stock your 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.
quality inspection stock
Company's own stock that is in quality inspection.
Types of stocks
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Stock in quality inspection is valuated but does not count as
unrestricted-use stock.
For MRP, it is either available or not available, depending on how thesystem is set.
Blocked stock
Company's own stock that should not be used.
It does not count as unrestricted-use stock for InventoryManagement
It is usually not available for MRP.
Types of stocks
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Restricted-use stock
Valuated stock of a material managed in batches held by a company(and belonging to that company)
Usage of this stock is subject to certain restrictions. This category ofstock is only used when batch status management is active.
Blocked stock returns
Stock that was returned by the customer and conditionally accepted.
It is neither valuated nor does it count as unrestricted-use stock.
Types of stocks
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stock in transfer
Quantity that was already withdrawn from stock at the issuinglocation but that has not yet arrived at the receiving location
Stock in transfer is managed in the valuated stock of the receivinglocation, but it does not yet count as unrestricted-use stock.
Stock in transit
Stock in transfer that is created in the case of a stock transfer via astock transport order.
Types of stocks
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Available stock
Dynamic stock that is calculated by MRP taking any receipts, issues,the current available stocks into account.
Which requirements, receipts, and issues are included in theavailability check is defined in the Customizing system.
Reserved stock
Sum of all quantities of a material that are reserved for withdrawal.
Reserved stock is usually not available from the point of view of MRP
For Inventory Management it still counts as unrestricted-use stock.
Types of stocks
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Planned receipts
Sum of all quantities whose receipt has been planned withreservations.
Planned receipts are usually already available from the point of viewof MRP
For Inventory Management they do not yet count as unrestricted-usestock.
Open PO quantity (total)
Sum of all outstanding PO quantities for a material.
The open PO quantity usually increases available stock in MRP
It does not increase unrestricted-use stock in Inventory Management.
Types of stocks
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Open order quantity (total)
Sum of all outstanding order quantities for a material.
The open order quantity usually increases available stock in MRP
It does not increase unrestricted-use stock in Inventory Management
Goods receipt blocked stock Sum of all quantities of a material that were delivered by vendors for
purchase orders and that have been conditionally accepted.
GR blocked stock is neither valuated nor does it count asunrestricted-use
Types of stocks
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Stock scheduled for delivery
Sum of all current deliveries to customers for which goods issueshave not yet been posted.
Like reserved stock, stock scheduled for delivery is usually notavailable from the point of view of MRP
It counts as unrestricted-use stock for Inventory Management.
Negative stocks
Negative stocks are required if, for example, goods issues areentered before the corresponding goods receipts for organizational
reasons and the material is already physically located in thewarehouse.
Batch management
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With batch handling, you can manage not onlyproduction lots from in-house production, but alsoproduction lots from vendors as separate entities.
Before you can manage batches of a material in stock,you must first specify in the material master record
that the material is to be managed in batches for thespecified plant.
To do this, you must set the batch managementrequirement indicator in the material master record
At the time of goods receipt system will allocate thebatch number
Goods movements
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Definition of Goods Movement
A goods movement is an event that causes a change in stock.
Good receipt
A goods receipt (GR) is a goods movement with which the receipt ofgoods from a vendor or from production is posted.
Goods issue
A goods issue (GI) is a goods movement with which a materialconsumption, or a shipment of goods to a customer is posted.
Goods movements
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Stock Transfer
Transfer of material from one plant to other plant or from one storagelocation to other storage location
Transfer Posting
changes in stock type or stock category of a material.
Examples of transfer postings are:
Transfer Postings From Material to Material
Release from quality inspection stock
Transfer of consignment material into company's own stock
The document concept
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When posting a goods movement in the SAP System,the following documents are created:
Material document
a material document is generated that serves as proof of themovement
Accounting document
If the movement is relevant for Financial Accounting anaccounting document is created
Cost accounting Document
Movement types
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Movement Type
When you enter a goods movement in the system, you must enter amovement type to differentiate between the various goodsmovements.
A movement type is a three-digit identification key for a goods
movement. Examples
Goods receipt for a purchase order 101
Goods issue for a cost center 201
Release from quality inspection stock 321
Movement types
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Control Functions of the Movement Type
The movement type has important control functions in InventoryManagement.
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 inthe system
Material documents
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Changing a Material Document
you can not change a document once it has been posted.
If you made a typing error when entering a goods movement youmust reverse the movement with a reversal document
Although you cannot change a posted document, you can use the
function "Change Material Document" to
enter additional information for the document.
print a goods receipt/issue slip for the document
Planning goods receipts
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Referencing Document During Entry of GoodsMovement
The documents used to plan goods receipts serve as referencedocuments for entering the goods movement
GR for purchase order
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Return Deliveries
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When you enter the return delivery, you shouldreference the purchase order or the material document,so that the system can
suggest data (for example, the storage location), to simplify datainput
perform certain checks (the returned quantity must not exceed thedelivered quantity)
reduce the quantity delivered to-date
reverse other updates that occurred (for example, for goods receiptinto consumption) when the goods receipt was entered
Shelf Life Expiration Date Check
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When you enter a goods receipt, it is possible to check
the shelf life of a material.
Prerequisites
The shelf life is only checked if the following prerequisites are met:
The minimum remaining shelf life is maintained in the materialmaster record or in the purchase order.
The minimum remaining shelf life is the minimum number of days forwhich the material must keep for the goods receipt to be accepted bythe system.
.
Other goods receipts
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initial entry of stock balances
external goods receipts without a purchase order
internal goods receipts without a production order
goods receipts of by-products
deliveries free of charge
returns from the customer
Reservations
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Goods issue for an order
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Results of a Goods Issue Posting
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A goods issue has the following results in the system:
material document is created
accounting document is created
Creation of a Goods Receipt/Issue Slip
Stock Update
Update of G/L Accounts
Consumption Update
Reservation Update
Order Update
Printing documents
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MM - INVOICE VERIFICATION
Target Group
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Purchase department
Stores department
Finance department
Course Objectives
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Enter and verify vendors invoice
Enter and verify vendors excise invoice
Devalue materials
Carry out physical inventory
On conclusion of this course, you should beable to
Introduction
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Contents
Invoice entry and verification
Credit memo
Excise invoice
Material devaluation
Physical inventory
Inventory management information
Exercises
Solutions
MM - invoice verification
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Invoice Verification in Materials Management serves
the following purposes:
It completes the materials procurement process
It allows invoices that do not originate in materials procurement (forexample, services, expenses, course costs, etc.) to be processed
It allows credit memos to be processed, either as invoicecancellations or discounts
Invoice Verification does not handle the payment or theanalysis of invoices.
The information required for these processes is passedon to A/C department.
Invoice verification
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Invoice Verification tasks include:
Entering invoices and credit memos that have been received
Checking the accuracy of invoices with respect to contents,prices, and arithmetic
Executing the account postings resulting from an invoice
Updating certain data in the SAP system, for example, openitems and material prices
Checking invoices that were blocked because they varied toogreatly from the purchase order
Types of Invoice Verification
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As a rule, an invoice refers to a transaction for which
the issuing party requests payment.
Invoice Verification differs depending on the type ofinvoice involved:
Invoices based on purchase orders
With purchase-order-based Invoice Verification, all the items of apurchase order can be settled together,
Invoices based on goods receipt
With goods-receipt-based Invoice Verification, each individual
goods receipt is invoiced separately.
Types of Invoice Verification
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Invoices without an order reference
When there is no reference to a purchase order, it is possible topost the transaction directly to
a material account
a G/L account
or an asset account.
Data required for invoice verification
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The key data required for Invoice Verification is
Master data
Transaction data
Material data
Material data is information on the materials bought or produced inthe company
Vendor data
Vendor data provides information on the suppliers a company dealswith.
Data required for invoice verification
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Accounting data
Accounting data is used to define G/L accounts
Transaction data
Transaction data records transactions or events in the SAP system.
Purchasing document Material document
Accounting document
Invoice data
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An invoice contains various information, such as:
Who issued the invoice?
Which transaction does the invoice refer to?
How much tax do you have to pay?
If the invoice refers to a particular transaction, the
system will automatically retrieve informationpertaining to the transaction
Terms of payment
Quantities to be invoiced
The amounts the system expects per item
Screens for Invoice Verification
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The initial screen
This contains general data such as
company code
currency
invoice reference.
The vendor screen
This contains data on the vendor
The terms of payment
taxes.
Screens for Invoice Verification
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The selection screen
This lists the items of the transaction specified on the initialscreen.
The layout of the selection screen depends on whether theinvoice is based on a purchase order or a goods receipt.
Invoice Based on a Purchase Order All the purchase order items are listed.
The quantity that is still to be billed (i.e. the difference between thequantity delivered and the quantity invoiced so far) appears as a defaultin the Quantity column.
Screens for Invoice Verification
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Invoice Based on a Goods Receipt
Goods-receipt-based invoice verification must have been defined inthe purchase order.
If the GR-IV field on the item screen in the purchase order is notselected, the goods receipt cannot be settled in this way.
There are two ways of finding the correct transaction in goods-
receipt-based Invoice Verification:
You can enter a delivery note number or a GR document numberand the system will list the items for the goods receipts on theselection screen;
you can enter a purchase order number and the system will list all
the GR documents
Parking the invoice
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Preliminary Posting
You can enter an invoice (or a credit memo) without posting it andsimply "park" it.
If you park an invoice or a credit memo the system does not makeany postings.
A parked document can be changed as often as you like. When data is added or changed, the changes are noted by the
system.
When no further changes are required, you can then post the parkeddocument.
Parking the invoice
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The preliminary posting function can be of great
advantage if:
You are interrupted when entering an invoice. You can park thedocument and continue processing it later on. This saves you timehaving to enter the data twice.
You wish to clear up some questions before you post an invoice. You
can park the document and continue processing it later on.
You wish to split the Invoice Verification process. One employee can,for example, park an invoice without checking it, while anothercarries out the actual checks and posts the document after makingany necessary corrections.
Data Update When Posting an Invoice
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When you post an invoice, the system carries out the
account movements and updates the following
The system generates a Financial Accounting document thatdisplays the accounts involved in the posting and the amountsposted to these accounts.
The system creates a purchase order statistic for each item in thepurchase order.
The moving average price is updated in the material master record Ifthe invoiced price differs from the price in the purchase order for amaterial with moving average price control
Blocking the invoice
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When an invoice is blocked, Financial Accounting
cannot pay the invoice.
The invoice must first be released in a separate stepbefore it can be processed.
Variances in an Invoice Item
Quantity variance (M)
Price variance (P)
Variance in order price quantity (G)
Schedule variance (T) Quality inspection (I)
Credit memos
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The term credit memo always refers to a credit memo
from the vendor.
Posting a credit memo always leads to a debit postingto the vendor account.
Two types of credit memos are possible:
Credit memos that refer to a purchase order or goods receipt
Credit memos that do not refer to a transaction.
Processing of credit memos is same as invoice
verification
Types of Delivery Costs
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In the SAP System, there are two types of deliverycosts:
Planned delivery costs
They are entered in the purchase order. Provisions are set up for the
relevant costs at goods receipt. The delivery costs posted at goodsreceipt can be referenced at invoice entry.
Unplanned delivery costs
They are only entered when the invoice is entered. No provision ismade at goods receipt.
Creating a excise invoice
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Transaction J1IA
Required entries
Purchase order number
Excise group
Vendors Excise invoice number Excise invoice date
In the details screen you can change
Description
Quantity
Excise duty
Valuation - Lowest value determination
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The Lowest Value Principle
The lowest value principle is a method of valuating material stocksfor balance sheet purposes.
The aim of this method is to valuate stocks as accurately as possibleaccording to the recognition-of-loss principle.
Profits that exist solely on the books as a result of changes in marketprices are to be avoided.
Expected losses are included in the balance sheet.
Lowest value determination
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Methods
In the SAP System there are various methods of determining tax orcommercial prices:
lowest value determination based on current market prices
system searches for the lowest price from among the various prices
stored for each material. lowest value determination based on rate of movement
lowest value determination based on range of coverage
Range of coverage = average stock : average consumption
Lowest value determination
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Calculating the Movement Rate
Movement rate = Total quantity of receipts/issues : Material stock x100
If the percentage of receipts/issues is smaller than Movement rate,the material is slow or non-moving
Devaluation percentage
Devaluation indicator
Updating prices in the material master record
Physical inventory
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Every company must carry out a physical inventory of
its warehouse stocks at least once per fiscal year tobalance its inventory
Stocks that can be inventoried
unrestricted-use stock in the warehouse
quality inspection stock
Blocked stock
Physical Inventory Process
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The process of physical inventory can be divided into
three phases:
Physical inventory preparation
Create a physical inventory document.
Block materials for posting.
Print and distribute the physical inventory document.
Physical inventory count
counting stocks
entering the result of the count on the physical inventory
document printout
Physical inventory
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Physical inventory analysis
entering the result of the count into the system
initiating a recount, if necessary
posting inventory differences
Processing Steps
Creating a physical inventory document
Entering the Physical Inventory Count
Post inventory differences
Physical inventory
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posting the physical inventory count and inventory
differences
If a physical inventory document exists, the following are combined inthis step:
The count is posted.
Any inventory differences are posted.
Posting inventory differences without reference to thephysical inventory document
A physical inventory document is created.
The count is posted.
Any inventory differences are posted.
Physical inventory
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Physical Inventory Status
To monitor physical inventory processing, each physical inventorydocument records the inventory steps which have been carried out.This information can be found in an item or document header.
physical inventory history for an item
In an inventory history you can determine which steps have beencarried out for the item.
document header
In the document header, the fields Count status, Adjustment statusand Delete status provide information on whether some or all of theitems have been counted, posted (inventory differences), or deleted.
Inventory management information
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You can perform the following functions by selecting
Environment from the Inventory Management menu.
List display
The List display function offers reports for documents posted inInventory Management.
Example: material documents for a material.
Stock display
Example: Stock overview
Information
The Information function allows you to display data (master data,transaction/movement data) from other applications.
Example: displaying a purchase order.
Inventory management information
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Balances display
The Balances display function offers analysis of the stockaccounts and of the GR/IR clearing account.
Consignment
The Consignment option permits analysis of the consignmentstocks from vendors as well as the consignment stocks and thereturnable packaging stocks at the customers site.
Batch where-used list
Batch search strategy
Inventory management information
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Material analysis
Stock values
Receipts and issues
Inventory turnover
Inventory turnover of the value of valuated stock is calculated as
follows:
Value of total consumption / Value of average valuated stock
Range of coverage
The range of coverage of the value of valuated stock is
calculated as follows: