Materials Management with SAP S/4HANA

Business Processes and Configuration

Jawad Akhtar, Martin Murray

• Publisher: SAP PRESS
• Year: 2020
• ISBN:
  9781493219964
• Edition: 2
• Topic: Informatique
• Subtopic: Sciences générales de l'informatique

Part I

Materials Management Foundations

1 Materials Management Overview

Materials management (MM) is a core functionality of SAP S/4HANA. The MM functionality is the engine that drives logistics and supply chain management. This chapter will describe the elements that make MM such an important part of SAP in general and the logistics function in particular.

In this chapter, we’ll describe the importance of the materials management (MM) functionality in SAP S/4HANA in the context of the overall functionality of SAP software and as a part of the supply chain.

MM contains many aspects of SAP functionality, including purchasing, goods receiving, material storage, consumption-based planning, and inventory. MM is highly integrated with other functionalities such as financial accounting, controlling, production planning (PP), sales, quality management (QM), plant maintenance (PM), and warehouse management (WM).

This chapter examines why MM is a core functionality in any SAP S/4HANA implementation and why MM can be described as the engine that drives the supply chain within the SAP system. In this chapter, you’ll learn how MM is integrated with other SAP components and functionalities.

1.1 What Is Materials Management?

This section provides a brief overview of the core SAP S/4HANA functionality and describes where MM fits into the structure. We’ll also cover business suite functionality, which includes important capabilities for supply chain management.

1.1.1 Materials Management in SAP S/4HANA

SAP was originally developed as an enterprise software package attractive to large manufacturing companies. As the number of companies adopting SAP began to grow, many smaller companies in many different industries came to believe that SAP could also provide them a competitive advantage.

Many of these smaller manufacturing companies required just the core SAP functionality, which usually consists of MM, SAP S/4HANA Finance, sales, and PP. Often, companies start their implementations with this core functionality, and then on the second and third phases of their implementations, they might introduce other functionalities such as WM (or embedded EWM), PM, human resources (HR), QM, and so on.

SAP not only continues to innovate with new offerings; its vision is to make SAP software simple to run and use. SAP S/4HANA is the latest offering that not only simplifies logistics operations by combining several interconnected logistics and supply chain functionalities, but also makes the entire experience of working with SAP software user friendly.

The latest annual release of the core SAP S/4HANA on-premise solution was in September 2019 (SAP S/4HANA 1909). Therefore, the examples and screenshots in this edition of the book are all from SAP S/4HANA 1909 (on-premise), unless otherwise stated.

SAP has also extensively worked on the user experience side of the software, and SAP Fiori is SAP’s next-generation user interface. The images and screenshots in this book are a mix of web-based SAP Fiori interfaces and the SAP Fiori-themed SAP GUI (graphical user interface). As SAP develops more extensive solutions and tools for its customers, MM continues to be an important foundation on which subsequent functionalities can be built.

Now that the history of MM as part of SAP S/4HANA has been discussed, the next section examines how MM works as part of the logistics function.

1.1.2 Materials Management in Logistics

Logistics in SAP incorporates a number of distinct areas that together follow the movement of materials from manufacturer to consumer. Logistics, in essence, is the management of business operations, including the acquisition, storage, transportation, and delivery of goods along the supply chain. A supply chain is a network of retailers, distributors, transporters, storage facilities, and suppliers that participate in the sale, delivery, and production of a particular product.

Let’s now review the MM functionality as part of logistics.

Management of the Supply Chain

Given the nature of logistics and the supply chain, MM is an integral part of the logistics function within SAP. While looking at MM in the supply chain, the three important flows, which are discussed in greater detail in Section 1.2, are the following flows:

• Material flow
  A material flow describes the movement of materials from the supplier to your company and then on to the customer (potentially including returns from the customer). Today, companies integrate with suppliers and customers, not just interact with them. Therefore, any improvements that provide visibility into material flows will allow your company to be flexible and responsive to your customers. Customers want to do business with companies that are responsive. These companies gain a competitive advantage and increase market share by being more flexible, quicker, and more dependable.
• Information flow
  An information flow includes transmitting orders (i.e., electronic data interchange [EDI], etc.) and updating the status of all deliveries. Companies that can show customers and vendors viability by using real-time information have a distinct competitive advantage over others.
• Financial flow
  A financial flow includes the financial documents created at each material movement. If a material is valuated, then a movement—credit or debit—is made between accounts to reflect the material’s value moving from, for example, inventory accounts to accounts payable (AP) clearing accounts.

SAP and Logistics

At this point, the logistics function and the flows within the supply chain have been defined. So how can SAP help to manage this supply chain to help your company gain a competitive advantage?

SAP ensures that the correct materials are at the correct locations at the correct time in the correct quantities and at the most competitive cost. Competitive advantage is achieved when your company can manage this process, which involves managing your company’s relationships with its suppliers and customers. Controlling inventory, forecasting customer demand, and receiving timely information concerning all aspects of supply chain transactions will also be involved.

When breaking this structure down and looking at the functionalities and components involved in the management of the suppl...