Vendor Master Data & Records, and Purchasing Information Data EGN 5620 Enterprise Systems Configuration Spring, 2012.

Vendor Master Data & Records,Vendor Master Data & Records,and and

Purchasing Information DataPurchasing Information Data

EGN 5620 Enterprise Systems ConfigurationEGN 5620 Enterprise Systems ConfigurationSpring, 2012Spring, 2012

Vendor Master Data & Records, Vendor Master Data & Records, and and

Purchasing Information Data Purchasing Information Data

Theories & ConceptsTheories & Concepts

Supply Chain ManagementSupply Chain Managementin a Manufacturing Plantin a Manufacturing Plant

ReceivingReceivingandand

InspectionInspection

RawRawMaterials,Materials,Parts, andParts, andIn-processIn-process

Ware-Ware-HousingHousing

ProductionProduction

FinishedFinishedGoodsGoodsWare-Ware-

housinghousing

Inspection,Inspection,Packaging,Packaging,

AndAndShippingShippingS

up

plie

rs

Cu

stom

ers

Materials Management

PurchasingPurchasing ProductionProductionControlControl

Warehousing andWarehousing andInventory ControlInventory Control

ShippingShippingand Trafficand Traffic

Physical materials flowPhysical materials flowInformation flowInformation flow

Purchasing ProcessPurchasing Process

Material RequisitionMaterial Requisition

Request for QuotationsRequest for Quotations

Select Best SupplierSelect Best Supplier

Purchase OrderPurchase Order

Receive and Inspect GoodsReceive and Inspect Goods

From purchasing, From purchasing, to potential suppliersto potential suppliers

From any department,From any department,to purchasingto purchasing

Based on quality, price, Based on quality, price, lead time, dependabilitylead time, dependability

From purchasing, From purchasing, to selected supplierto selected supplier

From supplier, to receiving,From supplier, to receiving,quality control, warehousequality control, warehouse

Mission of Purchasing Mission of Purchasing OrganizationOrganization

It develops purchasing plans for each major product or service that are consistent with operations strategies:◦Lower production costs◦Faster and on-time deliveries◦Higher quality products and services◦Flexibility

Purchasing ManagementPurchasing Management

Maintain data base of available, qualified suppliers

Qualify and select suppliers to supply each material

Negotiate contracts with suppliersAct as interface between company and

suppliersProvide training to suppliers on latest

technologies

PurchasingPurchasingFactors contributing to the importance of

purchasing today:◦Focus on core business

Up to 60-70% of each sales dollar is paid to material suppliers

Great impact of material costs on profit ◦Popular use of just-in-time concept

Supply deliveries must be exact in timing, quantity, and quality

◦Globalization Geographically “stretched-out” supply chain

◦Intensified competition for scarce resources

Justifications for Centralized Justifications for Centralized PurchasingPurchasingBuying in large quantities

better pricesMore clout with suppliers

greater supply continuityLarger purchasing department

buyer specializationCombining small orders

less order cost duplicationCombining shipments

lower transportation costsBetter overall control

Buyers’ DutiesBuyers’ DutiesKnow the market for their commoditiesUnderstand the laws.... tax, contract,

patent..…Process purchase requisitions and

quotation requestsMake supplier selectionsNegotiate prices and conditions of salePlace and follow-up on purchase ordersMaintain ethical behavior

January 2008January 2008

© SAP AG - University Alliances and © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All The Rushmore Group, LLC 2008. All rights reserved. rights reserved. 1010

Types of Buyer/Supplier RelationshipsTypes of Buyer/Supplier Relationships

Antagonistic ◦Parties view each other as the enemy (lose/lose)

Adversarial◦Each party attempts to maximize their gain

(win/lose)Cooperative

◦Parties understand the benefits of working together (win/win)

Collaborative◦Parties look for opportunities to create value

(win/win)

A paradigm shift in purchasing A paradigm shift in purchasing practicepractice 1970 and before

◦ Open bidding ◦ Select the lowest price

1980◦ Open bidding◦ Select the best value

1990◦ Solicit bids from qualified vendors◦ Select the best value

2000 & beyond◦ Build/grow long term partnership

Improve supplier’s product/process quality and delivery commitment

Share profit/price◦ Form supply chains



Trend in Buyer/Supplier RelationshipsTrend in Buyer/Supplier Relationships

Traditional purchasing process tends to◦Create an environment of mistrust and low

bidder mentality, ◦Leading to higher total purchasing costs

Trend is◦Collaborative partnership◦To establish long term product/service supply

contact agreements ◦Via identifying, qualifying, and cultivating longer

term suppliers/partners



Benefits of Managing the Benefits of Managing the Supply BaseSupply BaseContract with only world-class suppliersThe fewer suppliers, the lower the

purchasing overheadPurchasing can pursue strategic sourcing

issues, instead of clerical functionsStreamline the supply chainImprove overall qualityImprove delivery performance



Process for building a supply baseProcess for building a supply base

1. Identify need for long term supplier contract (agreement)

2. Determine specific sourcing requirements3. Identify potential suppliers4. Determine method of evaluating suppliers5. Select supplier for contract (agreement)6. Negotiate and execute contract

(agreement)



Supplier Evaluation and SelectionSupplier Evaluation and Selection

A critical step is to identify and evaluate potential suppliers

It usually involves supplier development aiming to◦ Develop partnership with good (product quality) suppliers◦ Improve total cost and delivery performance of purchased

materials and services Qualification process includes

◦ Vendor’s qualification◦ Vendor’s product/service qualification (vendor sub-range)



Outline AgreementOutline Agreement

Long-term purchase agreements Can be divided into the types below:

◦Contracts ◦Scheduling agreements

Can be subject to a release (approval or clearance) procedure



Contract ManagementContract Management

Track supplier performance using metrics for◦On-time delivery◦Material and/or service quality◦Returned materials◦Expedite issues◦Pricing analysis

Resolve problems Engage in continuous improvement

processTerminate/renew contract agreement



Contracting QuestionsContracting Questions

How will potential suppliers be evaluated and selected?

What procedures will be required to manage the contracts (and suppliers)?

How will performance be measured?How many are too many suppliers?

◦ Too many suppliers cost money◦ Supplier integration◦ Collaborative agreements◦ Supplier development◦ Without material production shuts down

What is the risk?



Creating a ContractCreating a Contract

Is a long-term agreement with a vendor to provide a material or service◦For an agreed upon period of time◦At a negotiated price or quantity

Can be created manually or with reference to purchase requisition, Request for Quote (RFQ)/quotation etc.



Contract typesContract types

Quantity contract◦Agreement with a particular vendor to purchase

a specific quantity of materials. Example: Target quantity of 50,000 meters of

electrical wire at $2/meter. (MK) Value contract

◦Similar to quantity contract except the agreement is to purchase an established monetary value of materials. Example: Target value of $100,000 for electrical

wire. (WK)

Vendor Master Data & Records, and Vendor Master Data & Records, and Purchasing Information Data Purchasing Information Data

SAP Implementation SAP Implementation



Vendor Master DataVendor Master Data

Includes all data required for ◦processing business transactions and◦corresponding with vendors

Information is shared between the◦accounting and ◦purchasing departments



Vendor Master Data & Records, Vendor Master Data & Records, and Purchasing Information Dataand Purchasing Information Data

Vendor master data and records are maintained by both ◦accounts payable (A/P) and ◦purchasing

Purchasing information data are maintained primarily by ◦purchasing



Vendor Master DataVendor Master DataA master record must be created for

every vendor◦General data, ◦Company Code data (Financial Accounting -

FI), and ◦Purchasing data (Material Management - MM)

Purchasing data Condition Control data Partner functions

Company code data Account management Payment

transactions

General data Address Control data Payment transactions



Vendor Master Data StructureVendor Master Data Structure

General Data:

AddressPurchasing

Data

Vendor 10001

General Data

Company Code DataFinancial Accounting (FI)

Purchasing Data (MM)



Vendor Master Data – Typical Vendor Master Data – Typical ScreenScreen

Vendor attributes that sufficiently differentiate them by their:

AddressControlPayment TransactionsAccounting InformationCorrespondencePurchasing DataPartner Functions



General Data – Address

Address Vendor Name Search Term Street address City, Region Postal code Country

CommunicationLanguageTelephone, Fax, E-Mail

Vendor Master Vendor Master General Data – AddressGeneral Data – Address



Vendor Master- General Data – Vendor Master- General Data – Control DataControl Data

Account Control• Customer (if the vendor is both a vendor and a

customer)

• Authorization

• Trading partner (if the vendor is a part of an independent company)

• Group key (combines vendors to enhance the search capacity)



Vendor Master- General Data – Vendor Master- General Data – Control DataControl DataTax Information

◦Tax codes used to enter ID number of the vendor

◦Fiscal address◦Country code ◦City code

Reference Data / Area◦International locator number

used to identify a legal, functional, or physical location within a business or organizational entity

◦Industry key allows similar vendors to be grouped by industry

◦Transport zone



Vendor Master - General Data – Vendor Master - General Data – Payment TransactionsPayment TransactionsBank Details

◦ Bank Key selected from a match code with company code entered

◦ Bank Account◦ Account Holder◦ Partner Bank Type (if vendor has more than one bank

account, then it allows to sequence those accounts)Payment Transactions

◦ Alternative Payee used to enter another vendor number

◦ Instruction Key To control which statements are given to the banks during the

payment order



Vendor Master – Accounting Vendor Master – Accounting InformationInformation

Accounting Information◦Reconciliation Account

see next slide◦Sort Key

used to select a sort for the allocation field◦Release Group

the release-approval group can be defined and configured to allow only those in the group to be able to “release for payment



Reconciliation AccountReconciliation AccountAn individual G/L account recorded in line-item

detail in the sub-ledger and summarized in the G/L

The information entered into the reconciliation account is all line-item data from the vendor account.

The reconciliation in the G/L is at the summary level and is used to reconcile against the vendor account at the total level, while the sub-ledger identifies line-item data.



Reconciliation AccountReconciliation Account

Postings to sub-ledgers (such as accounts receivable or accounts payable) are automatically concurrently posted to the corresponding reconciliation account in the General Ledger

Thus, the General Ledger is automatically updated and remains in balance with the customer and vendor individual account totals



Subsidiary Ledger Accounts

A/R, A/P, GR/IR

General Ledger Reconciliation AccountsA/R, A/P, GR/IR

General LedgerGeneral LedgerReconciliation Account (continued)Reconciliation Account (continued)

Debit Credit

Debit Credit

A/P

Debit Credit

A/R

Debit Credit

GR/IR

$$ $$

$$ $$$$ $$$$ $$

GeneralLedger



Vendor Master – Accounting Vendor Master – Accounting InformationInformation

Interest Calculation◦Interest Calculation Indication

for automation interest calculation, and is configured by accounting department

◦Interest Calculation Frequency used to select a period for calculation of interest

Withholding Tax◦Withholding Tax Code◦Exemption Number



Account GroupsAccount GroupsIdentifier that controls which fields must

be entered when an account is createdDetermine a valid number interval for

each of the groups (types) of General Ledger accounts that have common attributes

Must be created before General Ledger Chart of Accounts master records can be created

You must assign each account to an appropriate account group

January 2008January 2008© SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. reserved. 3737

Account Groups

Chrt/accts Acct group Description From To CHRT BS Balance Sheet (BS) 100000 399999 CHRT PL Income Sheet 400000 999999 CHRT RA Reconciliation 110000 310000



Account Group BS

Account controlAccount managementDocument entryBank/financial detailsInterest calculationJoint venture

Account Groups



Field StatusField StatusField status controls how the data will be

entered for a field when an accounting master record is being used in a transaction

Determining whether a field is required, optional, suppressed, or display only

Field status controls are also relevant to a specific activity — create, change, or display



Field Status VariantField Status Variant

Fld status groupTextZALL All Accounts

ZBSA Balance Sheet Accounts ZEXP Expense Accounts ZGRI Material Management (GR/IR) Accounts ZRCN Reconciliation Accounts ZREV Revenue Accounts



Field status variant (V000) - Group ZBSA - Balance Sheet Acct.

General dataAdditional account assignmentsMaterials managementPayment transactionsAsset accountingTaxes

...

General Data Suppress Req. entry Opt. entry Display

Assignment numberTextInvoice reference…

Field Status Variant



Vendor Master – Payment TransactionsVendor Master – Payment Transactions

Payment Data◦ Payment Terms (cash discounts and favorable payment

periods offered by vendor)◦ Tolerance Group (the limit to which an event can deviate)◦ Check Double Invoice (to check for double or duplicate

invoices when they are entered)◦ Check Cashing Time

Automatic Payment Transactions◦ Payment Methods◦ Alternate Payee◦ Payment Block(prevent any open items from being paid)

Invoice Verification◦ Tolerance Group



Vendor Master – Vendor Master – Correspondence AccountingCorrespondence AccountingDunning Data

◦ Dunning Procedure To remind vendors to deliver the material from the purchase orders

◦ Dunning Block If selected, the vendor is not for dunning run

◦ Dunning Recipient ◦ Date of Legal Dunning Procedure

Correspondence information◦ Local Processing◦ Accounting Clerk◦ Account With Vendor

used to identify the company◦ Clerk at vendor

the contact person at the vendor side



Vendor Master –Purchasing DataVendor Master –Purchasing Data

Conditions◦Order Currency◦Terms of Payment◦Incoterms (next slide)◦Minimum Order Value

Sales Data◦Salesperson◦Telephone◦Account with vendor



Vendor Master –Purchasing DataVendor Master –Purchasing DataIncoterms

are standard trade definitions used in international contracts. The International Chamber of Commerce based in Paris, devised these standard trade definitions. The 13 incoterms are divided into four groups (arrival, departure, carriage paid by seller, and carriage not paid by seller).

Group Incoterm Long Name Location

E-Departure EXW Ex work Named Place

D - Arrival DAF Delivered at Frontier Named Place

D - Arrival DES Delivered Ex Ship Port of Destination

D - Arrival DEQ Delivered Ex Quay Port of Destination

D - Arrival DDU Delivered Duty Unpaid Destination

D - Arrival DDP Delivered Duty Paid Destination

C- Paid CFR Cost and Freight Port of Destination

C- Paid CIF Cost, Insurance, Freight Port of Destination

C- Paid CPT Carriage Paid to Destination

C- Paid CIP Carriage, Insurance Paid Destination

F - Unpaid FCA Free Carrier Named Place

F - Unpaid FAS Free Alongside Ship Port of Destination

F - Unpaid FOB Free on Board Port of Destination



Vendor Master –Purchasing DataVendor Master –Purchasing Data

• Control Data• Acknowledgement Required

• To indicate if acknowledgement is required upon receipt of the order

• Automatic Purchase Order • To allow automatic issuance of purchase order

• Good receipt-based invoice verification• To perform invoice verification based on the goods receipt amounts

• Subsequent settlement• To allow a rebate

• Default Data Material• Purchasing Group

• Planned Delivery Time

• Confirmation control (confirmation type and sequence)



Vendor Master – Purchasing Data – Vendor Master – Purchasing Data – Partner FunctionsPartner Functions

Partner Functions◦Used to define the relationships between the

vendor (or customer) and the company.

List of (Vendor) Partner Functions◦AZ alternative payment recipient ◦CA contract address◦CP contact person◦ER employee responsible◦GS goods supplier◦OA ordering address◦PI invoice presented by◦VN vendor



Vendor Master – Purchasing Data – Vendor Master – Purchasing Data – Account GroupAccount Group

Vendor masters are assigned to a vendor account group

Through field status maintenance, vendor account groups can be set up for one-time vendors, regional vendors, and internal vendors

The vendor account group controls both type and number range assignment for vendors



Purchasing Info RecordPurchasing Info Record

The purchasing info record provides continuously updated information about ◦the relationship of a specific material with a

specific vendor◦Order unit, price, price changes, tolerances,

reminder information, historic data, statistics, texts

◦Choice of automatic or manual updating



Source ListSource List

It stores information about where to acquire a given material for a given period of time

It specifies whether this source should be used by Materials Requirement Planning (MRP)



Purchasing TolerancesPurchasing Tolerances

A tolerance limit set for allowed variance before a warning/error message is displayed◦Price variance

Compares the price in the purchase order with the valuation price stored in the material master

◦Maximum cash discount This tolerance limit is set to assure that cash

discounts do not exceed allowable discounts



Goods Receipts TolerancesGoods Receipts TolerancesPurchase order price quantity

◦Two tolerance levels maintained per item The maximum percentage variance before a goods

receipt postings is not allowed A percent variance that generates a warning

message but allows posting Moving average price variance

◦the maximum moving average price change allowed



Invoice Receipts TolerancesInvoice Receipts TolerancesTolerance limits configured for invoice

receipts: price, quantity, and blanket purchase orders

The tolerances include:◦Amount for item with or without order reference◦Percentage Over/Under Quantity Variance◦Exceed amount: quantity variance◦Blanket purchase order (value and time limit)◦Price variance



Automatic Account AssignmentAutomatic Account Assignment

Created to avoid manual postings of financial transactions which follow goods movements to reflect the values of transferred materials

Used across all modules to keep track of the values of materials that are being consumed (e.g., production), or transferred into other valuation areas of the company

Is a set of rules and master data which enable the financial tracking of logistics movement



Automatic Account AssignmentAutomatic Account AssignmentComponentsComponents

Chart of AccountsValuation Grouping Code

◦Example: valuation area is plant, five plants exist in the company, all five plants use the same accounts.

◦Multiple valuation groups are possibleTransaction KeyModifier for Transaction KeyValuation Class



Automatic Account AssignmentAutomatic Account AssignmentValuation Grouping CodeValuation Grouping Code

Plant – P004Plant – P001

Grouping CodeG001

Plant – P003

Plant – P002

Grouping CodeG002

Plant – P005



Automatic Account AssignmentAutomatic Account AssignmentTransaction KeysTransaction Keys

Transaction Keys ◦The transaction keys are used to determine

accounts or posting keys for line items which are created automatically by the system.

◦The transaction keys are defined in the system.



Automatic Account AssignmentAutomatic Account AssignmentTransaction KeysTransaction KeysTransaction Keys

◦Inventory Postings BSX

◦Offsetting Entry for Inventory Postings GBB

◦Materials Management Small Differences DIF

◦Cost (price) differences (PPV) PRD

◦Goods receipt / inv. receipt clearing acct WRX



Automatic Account AssignmentAutomatic Account AssignmentModifierModifier

Modifier – modifies the transaction key for various movement types◦ Blank – Goods receipt from purchase order

with account assignment◦ VBR – Goods issue to consumption ◦ VAX – Goods issue to sales – post to cost of

goods sold◦ AUF – Goods receipt from a production order

– post to production settlement◦ Etc. – Many others



Material Types & Valuation Material Types & Valuation ClassesClasses

Account category reference:◦Builds the link between material types and the

valuation class(es)



Material Types & Valuation Material Types & Valuation ClassesClasses

Material TypeROH (Raw Material)

Acct Cat. Ref0001 – Raw Materials

Valuation Class3100(Trading Goods)

Valuation Class3000(Raw)

Valuation Class7920(Finished goods)

Valuation Class3030(Supplies)



Account

7210_ _


Plant P

_ _ _

Valuation Class3100 (Trading Good)

Grouping CodeG_ _ _

Goods MovementGBB (Goods issue)

Account ModifierBlank (Goods receipt)

Valuation Class3030 (Supplies Good)

Grouping CodeG_ _ _

Goods MovementGBB (Goods issue)

Account Modifier Blank (Goods receipt.)

Account

7400_ _




Vendor Master Data & Records, & Purchase Information Records

PEN, Inc.

Pen Inc. : SuppliesPen Inc. : Supplies

Pen Inc. : Vendor MasterPen Inc. : Vendor Master

Pen Inc. : Purchase Pen Inc. : Purchase Information RecordsInformation Records

Pen Inc. : Source ListPen Inc. : Source List

Exercises:Exercises:89. Set default values for inventory management reservations90. Maintain purchasing tolerance limits91. Maintain goods receipt tolerance limits92. Maintain invoice receipt tolerance limits93. Set (review) valuation control94. Assign valuation area grouping95. Define (review) valuation classes208. Create labor expense account209. Create production order settlement account210. Create production variance account96. Configure automatic postings for goods movement97. Configure automatic posting for taxes98. Set parameters for invoice verification99. Create default values for invoice verification173. Create purchasing information records173a.Create source list

Vendor Master Data & Records, and Purchasing Information Data EGN 5620 Enterprise Systems Configuration Spring, 2012.

Documents

purchasing management

purchasing factors

warehouse slide

centralized purchasing

qualified suppliers

value winwin slide

suppliers act

overall control slide