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The Procurement Process (MM)

The Procurement Process (MM). Introduction. The procurement process involves purchasing goods from vendors through an internal purchasing organization These goods might be used for resale in a manufacturing process as packaging Goods are received into inventory Invoices are verified.

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The Procurement Process (MM)

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  1. The Procurement Process (MM)

  2. Introduction • The procurement process involves purchasing goods from vendors through an internal purchasing organization • These goods might be used • for resale • in a manufacturing process • as packaging • Goods are received into inventory • Invoices are verified

  3. SAP Process Diagram

  4. Materials Management Tasks • Vendor management • Purchasing • Physical inventory • Inventory management (quantities) • Inventory valuation • Invoice verification • Materials management (MM) • MRP • Product catalogs

  5. Vendors (Introduction) • Vendors sell goods to us • Some information is pertinent to the company • Some applies only to a particular purchasing organization

  6. Vendors (Configuration) • Vendor information is divided into three categories • General data (applicable to the client) • Company code (accounting) data • Purchasing data (applicable to the purchasing organization)

  7. Vendor Data (Taxonomy) • Client data (LFA1) • Client / Account number keys • Contains name and address information • One-time account indicator • Contains the account group (KT0KK) • The vendor account group controls the transaction types possible with the vendor

  8. Vendor Data (Taxonomy) • Company code (LFB1) • Client / Account number / Company code keys • Reconciliation and bank account information (accounting segment) • Co/Cd gives us the link to our G/L • Link to GL recon account (AKONT)

  9. Vendor Data (Taxonomy) • Purchasing organization (LFM1) • Client / Account number / Purchasing Organization keys • Sales person name • Currency of purchase order

  10. Vendor (Account Group) • Every vendor is assigned to an account group • The account group defines which partner functions are allowed • Partner functions for a vendor

  11. Organizational Structure (1) • Purchasing Organization (PO) • An organizational unit in logistics • Manages the buying activities for a plant • Procures services and materials • A purchasing organization can be responsible for many plants • Purchasing group • Group of buyers within a PO responsible for certain activities

  12. Organizational Structure (2) • Purchasing can be centralized or decentralized • Centralized (one purchasing organization for many plants) • Decentralized (many purchasing organizations) • Global bikes has a hybrid purchasing organization • Global / US / DE

  13. Purchasing Organizations (GBI)

  14. Purchasing Organizations (GBI)

  15. Organizational Structure (Plants) • In plants, we make things or store things • A plant has a purchasing organization assigned to it • There is a hierarchical relationship between the following • A client has one or more plants (T001W) • A plant has one or more storage locations T001L where goods are stored (logical or physical) • A plant belongs to a valuation area (T001K) (where goods are valued) • A plant belongs to a purchasing organization

  16. Plant Table T001W • Global Bike has 5 plants • Each plant is assigned a purchasing organization

  17. Storage Location Table T001L • Global Bike uses logical storage locations

  18. Valuation Table • Plants belong to a valuation area • A valuation area belongs to a company code • So materials can be valued at the plant or company code level

  19. GBI Organizational Structure

  20. Materials Introduction • Materials are the things we buy from vendors • Supplies that we consume internally • Trading goods that we buy and resell • Raw materials that we use in production • Semi-finished goods that we make from raw materials and use in the production of finished goods • Finished goods that we make and sell using raw materials and semi-finished goods

  21. Material Types • SAP predefines several material types • A material’s type dictates what can be done with the material

  22. Material Types (Configuration) • Material types are configured through the IMG (OMS2)

  23. Material Types (Configuration) • And stored in table T134T

  24. Material Master Data • Everything our company needs to know about the material • Data is stored in functional segments called views • Basic data • Sales • Materials Management • Accounting • MRP • Etc.

  25. Material Views

  26. Material Master (Financial) • Financial data is maintained about a material • Valuation currency is the currency in which the unit is priced • Valuation class – The inventory account associated with the material • Price control • Moving average price – the average price of materials in stock • Standard price – material prices are updated periodically

  27. Material Master (Financial)

  28. Material Master (Purchasing) • Purchasing group • Goods receipt processing time • Time to move goods into inventory • Delivery tolerances

  29. Material Master (Purchasing)

  30. Material Master (Plant) • Environmental requirements • Special storage containers or handling • Shelf life • Weight

  31. Material Master (Plant)

  32. Purchasing Information • We purchase materials from vendors • Purchasing information defines the relationship between a vendor and a material • This information is used to create purchases from • Quotations • Manually

  33. Purchasing Information Record • Determines which materials are supplied by which vendors • Purchasing information • Pricing • Lead times • Availability periods • Order history

  34. Purchasing Documents • Purchase requisition • Request for quotation • Purchase order • Goods receipt • Vendor invoice processing

  35. Common Purchasing Sequence

  36. Purchase Requisition • An internal rather than external document • It instructs purchasing to request specific goods be purchased to arrive at a specific time • A requisition gets created • Manually • Automatically through MRP, production orders, or sales orders

  37. Requisition Sourcing • Requisitions must be assigned a source of supply • Internally • Get goods from our own plant or centralized warehouse • A list of sources • Vendors who provide the particular material • Outlined agreements • Long-term purchasing agreements • RFQ

  38. Request for Quotation • Use for very expensive goods or goods with no known source • It’s an invitation for a vendor to bid • Quotations from vendors are legally binding offers • Price, materials, shipping details are all defined

  39. Vendor Evaluation • SAP allows you to evaluate vendors based on • Price • Quality • Delivery • You define scoring ranges • You define detailed criteria

  40. Purchase Order • It’s really the acceptance contract for the vendor’s quotation • A request to procure specific materials or services and the conditions of procurement

  41. Types of Purchase Orders • SAP supports different types of purchase orders • Standard • For services • For consignment • And others

  42. Purchase Order Structure • Remember the structure of a document • Header information • Vendor / payment terms • Item overview • Materials, quantities, item delivery dates • Line items • Item prices

  43. Purchase Order Output • All is not printed • Purchase orders might be sent via • E-mail • EDI • Fax • XML

  44. Goods Receipt • Here is where we receive the goods from the vendor from our purchase order • Tasks • Determine whether order is correct • Update purchase order history with receipt of goods • Updates physical inventory • Updates G/L account (Inventory)

  45. Receipt of Goods (Events) • Several events fire when goods are received • Material document created • Accounting documents created • Inventory is updated • Purchase order status is updated

  46. Vendor Invoice Processing • Invoices are validated against the corresponding purchase order • Discrepancies might cause the invoice to be blocked • When processed • The accounts payable liability is created • Payment process is initiated for financial accounting

  47. Financial Accounting Processing • Accounting pays the invoice • Payment method • Bank • Items • It’s possible to pay all or part of an invoice • Medium • Can be done manually or automatically

  48. Goods Receipt Invoice Receipt Payment Program AP (Vendor) Inventory Bank GR / IR Dr Cr Dr Cr Dr Cr Dr Cr $100 $100 $100 $100 $100 $100 Financial Accounting (G/L) Transactions

  49. Material Movement (1) • SAP tracks the movement of goods in, around, and out of a warehouse • They are depicted using three digit codes • 101 – goods receipt into warehouse • 103 – goods receipt into GR blocked stock • 122 – return delivery to vendor • 231 – consumption for a sales order • 561 – initial entry of stock

  50. Material Movement (2) • Goods can be placed into different destinations • Into the warehouse • Unrestricted use • Blocked use • Quality assurance

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