Procurement with SAP MM: Business User Guide

Matt Chudy, Luis Castedo

• Publisher: SAP PRESS
• Year: 2017
• Print ISBN: 9781493215171
• eBook ISBN: 9781493215188
• Edition: 2
• Topic: Computer Science
• Subtopic: Computer Science General
• Index: Computer Science

Obtain. Acquire. Procure. Get everything you need with this go-to guide to procurement with SAP Materials Management (SAP MM)! Dive into the key functions and system transactions you'll need for your everyday job, from creating POs or contracts to processing invoices and payments. Discover how to avoid problems and system issues, and explore advanced functions and concepts. Streamline your procurement activities with fewer steps, greater ease, and less effort than ever before! a. Essential Procurement Tasks Master your procurement activities: defining tasks, creating bids, selecting vendors, creating POs or contracts, and processing invoices and payments. Set up your system to receive your goods quickly and economically, and then manage your inventory once you have it.b. Special Procurement ActivitiesWork with outside-the-box tasks, such as providing vendors with materials from your own plant or another vendor, moving stock between warehouses or company codes, and order optimizing. c. EHP 8, SAP HANA, and more!This edition is updated and expanded to incorporate subcontracting and third-party orders, stock transport functionality, and handling unit management. See how new technologies like SAP S/4HANA and SAP Ariba fit into the SAP MM landscape.

Enterprise resource planning systems have revolutionized how businesses are run today. Procurement has been there from day one, and it has been getting better ever since.

1 Management at a Glance

SAP ERP is an integrated piece of software for executing the everyday operations of a company. A company can plan and execute the entire series of steps involved in its supply chain—from sales forecasting, master production scheduling, production planning, production scheduling, purchasing, inventory management, to warehousing—along with the logistics chain, which is involved in the distribution of the company’s products, shipping, transportation planning, and yard management.

Procurement plays an important role in most of these activities and includes all activities and processes related to acquiring goods and services. Procurement involves defining requirements for goods and services, establishing sources of supply, negotiating contracts, performing vendor evaluations. Finally, purchasing crowns these activities with purchase orders, bringing goods into the warehouse and finishing with payment to the supplier.

Most top-tier ERP applications include procurement functionalities, and SAP provided this capability as one of its key offerings at the company’s inception in 1972. As SAP’s software evolved from R/1 through R/3 into a better and more robust product with each new release, procurement needs have been addressed along the way, bringing additional functionalities and new tools to help companies with planning, forecasting, processing purchase requisitions, assigning sources of supply, creating purchase orders, receiving goods and materials, and paying incoming invoices.

This chapter will help you understand the structure of SAP ERP software, in which Materials Management (MM) plays a central role. We’ll help you understand how the Purchasing component (which is often referred to interchangeably with Procurement) integrates into the SAP architecture, and then we’ll provide a brief overview of the SAP Business Suite. Many of these suite components provide functionality that integrates with the procurement functionality, which we’ll discuss throughout the book.

1.1 Materials Management Overview

Materials Management (MM) is the SAP ERP component that contains most of the purchasing, or procurement, activities. This important part of the Logistics component of the SAP ERP system executes several different processes within a company including materials planning, purchasing, inventory control, and inventory valuation.

Note

In this book, we often use the terms purchasing and procurement interchangeably.

To differentiate procurement from purchasing, the term procurement is the function that describes the activities and processes to acquire goods and services. Thus, procurement includes all of the activities involved in establishing fundamental requirements, sourcing activities such as market research and vendor evaluation and contract negotiation. The term purchasing refers to the process of ordering and receiving goods and services and is a subset of the wider procurement process.

To support these processes, the MM component has several tools, including the following:

• A robust material requirements planning (MRP) system
• Several different procurement tools that allow you to choose a variety of different ways to interact with vendors
• An inventory control system based on movement types, which allows a different accounting treatment depending on whether the material came in as a result of a purchase order, a production order, or an inventory adjustment or if the materials are taken out of the warehouse for consumption, for production, for order fulfillment, to supply consignment stores, or other movements that may affect the count of materials inside the warehouse and thus the valuation of that inventory in accounting

Functionally, MM can be divided into the following: MRP, Purchasing, and inventory valuation and control (see Figure 1.1). We’ll discuss each of these in the following sections.

Figure 1.1 Materials Management: MRP, Purchasing, and Inventory Valuation and Control

1.1.1 Material Requirements Planning

Material requirements planning (MRP) is a submodule that monitors all of the needs of the different materials that the company buys and sells. MRP can start off with Planned Independent Requirements (PIRs) or sales forecasts for the finished goods and from there explode the bill of materials (BOM) and generate the pegged or inherited requirements for each of the components that form the finished good. Planned production orders are generated for manufacturing depending on the lead times for making or assembling the product and also on the purchasing lead times of each of the components.

1.1.2 Purchasing

Linked to the MRP results, and along with triggering or planning production orders, SAP ERP can also create or plan purchase requisitions for those components that are either missing or that have to be replenished after consuming the quantities taken by manufacturing.

To execute those purchases, SAP ERP can either create individual purchase orders or have agreements with vendors to help your company secure lower prices, have quantities of materials available on certain dates, or both. These agreements also serve as a way to communicate to vendors about the consumption forecast for some materials and to arrange deliveries of smaller quantities more often to reduce your inventory to a manageable mi...

Table of contents

• Dear Reader
• Notes on Usage
• Table of Contents
• 1   Management at a Glance
• 2   Master Data
• 3   Planning and Forecasting
• 4   Purchasing from Third Parties
• 5   Intracompany and Cross-Company Procurement
• 6   Kanban
• 7   Order Optimizing
• 8   Procurement of Services
• 9   Inbound Logistics
• 10   Inventory Management
• 11   Logistics Invoice Verification
• A   Procurement Tables
• B   Working with Procurement Documents: Quick Reference Guide
• C   Additional Resources
• D   The Authors
• Index
• Service Pages
• Legal Notes