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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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    p

    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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    g

    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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    g

    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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    g g g

    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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    g

    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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    g

    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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    g p

    Purchase department

    Stores department

    Course Objectives

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    j

    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: