CT104-3-2- IBPSES

Topic: Material Management

CT104-3-2 & IBPSES Material Management SLIDE 1

 Teaching material - Information

i Teaching material - Version

 4.1 (June 2022)

 Software used
• S/4HANA 2020
• Fiori 3.0
 Model
• Global Bike

 Prerequisites
• No prerequisites needed

CT104-3-2 & IBPSES Material Management SLIDE 2

 Module Information

Learning Objectives

You are able to:

 Describe the purchase-to-pay business process
 Identify the organizational levels that support the purchase-to-pay business
process
 Create a material master record
 Create a vendor master record
 Create a purchase requisition for stock and consumable materials
 Create a purchase order by referencing a purchase requisition
 Post a goods receipt for a purchase order
 Explain the warehouse structure in Warehouse Management (WM)
 Enter a vendor's invoice
 Process the automatic payment run
 Explain the integration points of the purchase-to-pay business process

CT104-3-2 & IBPSES Material Management SLIDE 3

 Functionality

• Inventory Management

• Purchasing

• MRP

• Physical Inventory

• Valuation

• Service Master
CT104-3-2 & IBPSES Material Management SLIDE 4
 Unit Overview

• MM Organizational Structure

• MM Master Data

• MM Processes
– Procure-to-Pay Process

CT104-3-2 & IBPSES Material Management SLIDE 5

 MM Organizational Structure (Materials
Management)
• Client
– An independent environment in the system

• Company Code
– Smallest organizational unit for which you can maintain a legal set of books

• Plant
– Operating area or branch within a company
• Manufacturing, distribution, purchasing or maintenance facility

• Storage Location
– An organizational unit allowing differentiation between the various stocks of a
material in a plant
CT104-3-2 & IBPSES Material Management SLIDE 6
 MM Organizational Structure (Purchasing)

• Purchasing Organization
– The buying activity for a plant takes place at the purchasing organization
– Organization unit responsible for procuring services and materials
– Negotiates conditions of the purchase with the vendors

• Purchasing Group
– Key that represents the buyer or group of buyers who are responsible for certain
purchasing activities
– Channel of communication for vendors

CT104-3-2 & IBPSES Material Management SLIDE 7

 Global Bike Structure for Materials
Management

Global Bike Client

Company
Global Bike Inc. Global Bike Germany GmbH Code

Dallas San Diego Miami Heidelberg Hamburg Plant

Raw Materials Trading Goods Trading Goods Raw Materials Trading Goods
Storage
Semi-fin. Goods Finished Goods Finished Goods Semi-fin. Goods Finished Goods Location
Finished Goods Miscellaneous Miscellaneous Finished Goods Miscellaneous

Miscellaneous Miscellaneous

CT104-3-2 & IBPSES Material Management SLIDE 8

 Global Bike Enterprise Structure in SAP ERP
(Logistics)
Shipping Point DL00 MI00 SD00 TO00 HD00 HH00 PE00

RM00 TG00 TG00 TG00 RM00 TG00 TG00

Storage SF00 FG00 FG00 FG00 SF00 FG00 FG00
Location
FG00 MI00 MI00 MI00 FG00 MI00 MI00
MI00 MI00

Central Purchasing Organization (global) GL00

Purchasing Org. US00 CA00 PO DE00 AU00

Purchasing Group North America PGr Europe Asia

N00 E00 A00

Dallas Miami S. Diego Toronto Heidelb. Hamburg Perth Plant

DL00 MI00 SD00 TO00 HD00 HH00 PE00
CC US00 CA00 CC DE00 AU00 Company Code

Client GBI

CT104-3-2 & IBPSES Material Management SLIDE 9

 MM Master Data

Vendor Master Data

Material Master Data

Purchasing Info Record

Condition Master Data

Output Master Data

CT104-3-2 & IBPSES Material Management SLIDE 10

 Vendor Master Data

• Vendor Master
– Contains all the necessary information
needed for business activities with an
external supplier
– Used and maintained primarily by the
Purchasing and Accounting
Departments
– Every vendor MUST have a master
record
– The supplier master record is created
in SAP S/4HANA as a central business
partner master record with different
roles.
– For suppliers, these are often the
business partner roles:
CT104-3-2 & IBPSES
• Material Management SLIDE 11
 Vendor Master Views

• Client Level
– Address
– Vendor Number General Data
– Preferred Communication

• Company Code Data Company Code Data

– Reconciliation Account Financial Accounting (FI)
– Terms of Payment
– Bank Account
Purchasing Data
• Purchase Org Data Materials Mgmt. (MM)
– Purchasing Currency
– Salesman’s Name
– Vendor Partners
CT104-3-2 & IBPSES Material Management SLIDE 12
 Vendor Master

General Information relevant for the entire organization:

Name
Address
Client XXX Communication

Company Code specific information: Purch. Organization specific information:

Acc. Mgmt Incoterms

Payment Currency
Company Code Bank
US00 Purch. Org. US00

Company Code DE00 Purch. Org. DE00

CT104-3-2 & IBPSES Material Management SLIDE 13

 Material Master Data

• Material Master

– Contains all the information a

company needs to manage about a
material

– It is used by most components within

the SAP system
• Sales and Distribution
• Materials Management
• Production
• Plant Maintenance
• Accounting/Controlling
• Quality Management

– Material master data is stored in

functional segments called Views
CT104-3-2 & IBPSES Material Management SLIDE 14
 Material Master Views

Sales Data

Basic Data Purchasing Data

Mat. Plan. Data

Material Master Forecasting Data

Storage Data

Controlling Data Quality Data

Accounting Data

CT104-3-2 & IBPSES Material Management SLIDE 15

 Material Master

General Information relevant for the entire organization:

Name
Weight
Client XXX Unit of Measure

Sales specific information: Storage Location specific information:

Delivering Plant Stock Qty

Loading Grp
Sales Org. UW00 Storage Loc. FG00

Sales Org. UE00 Storage Loc. TG00

CT104-3-2 & IBPSES Material Management SLIDE 16

 Purchasing Information Record

• Framework for Purchase Order

– Contains the relationship between a vendor and a material

Purchasing
• Can be created: Information Record
– Manually
– Automatically – Quotations
– Automatically – Purch. Orders

• Reporting
Material Master Vendor Master
– Vendor Evaluation

CT104-3-2 & IBPSES Material Management SLIDE 17

 Purchasing Information Record

• Allows buyers to quickly determine:

– Which vendors have offered or supplied specific materials

• Info Records contain:

– Data on pricing and conditions
– Last purchase order
– Tolerance limits for deliveries
– Specific lead times
– Availability periods
– Vendor Evaluation data

• Serves as default information for Purchase Orders

CT104-3-2 & IBPSES Material Management SLIDE 18

 Master Data in Use

Purchase
Order

45......01

Material Master Vendor Master

Purchasing
Information Record

CT104-3-2 & IBPSES Material Management SLIDE 19

 Procure-To-Pay Process

Purchase Vendor
Requisition Selection
Purchase
Order

Notify
Payment Vendor
to Vendor

Invoice Vendor
Receipt Shipment
Goods
Receipt

CT104-3-2 & IBPSES Material Management SLIDE 20

 Purchase Requisition

• Internal Document instructing the purchasing department to request

a specific good or service for a specified time

• Requisitions can be created two ways:

– Directly - Manually
• person creating determines: what, how much, and when
– Indirectly - Automatically
• MRP
• Production Orders
• Maintenance Orders
• Sales Orders

CT104-3-2 & IBPSES Material Management SLIDE 21

 Requisition Sourcing

• Once the requisition has been assigned a source of supply it can be

released for processing

• There are a variety of ways that a purchasing department can process

a requisition to determine the appropriate Source of Supply:
– Internal Sourcing Requirements
– Source List
– Outlined Agreement
– RFQ

CT104-3-2 & IBPSES Material Management SLIDE 22

 Internal Sourcing

• The requisition for materials could be satisfied by sources within our

company.
– It is possible that a plant within your firm could represent a potential source of
supply for the material needed (centralized warehouse)
– If an internal source is identified the requirement is covered by an internal
procurement transaction (stock transport order)

CT104-3-2 & IBPSES Material Management SLIDE 23

 Source List

• A source list is a record that specifies the allowed means for procuring
a material for a certain plant within a given time period.
– If the list contains a sole source the system will assign the vendor to the requisition.
– If several options exist the system will display a list of vendors for you to choose
from.
– If no source has been established the system will revert to search information
records and outline agreements.

CT104-3-2 & IBPSES Material Management SLIDE 24

 Outline Agreement

• Requisitions can be satisfied through existing longer-term purchasing

agreement

• These agreements are subdivided into:

– Contracts
• Consists of items defining the individual materials, material groups, or services with
prices and in many cases quantities
– Quantity
– Value
– Scheduling Agreements
• Total quantity of material is spread over a certain period in a delivery schedule, consisting
of line items indicating quantities and their planned delivery date

CT104-3-2 & IBPSES Material Management SLIDE 25

 Request for Quotation

• If nothing exist in the system we may need to submit a request for

quotation to our vendors. An RFQ is an invitation to a vendor by a
Purchasing Organization to submit a bid for the supply of materials or
services
– The accepted quotations will generate Purchasing Information Records
– Perform Quotation Price Comparisons P.O.
Quote 45…12
– Finally Select a Quotation
Vendor
Pur generate 1
RFQ Quote Eval.
Req.
Vendor
2 Reject
Quote Letter
Vendor
3

CT104-3-2 & IBPSES Material Management SLIDE 26

 Quotation from Vendor

• The quotation received by your company is a legally binding offer,

should decide to do business with the vendor, containing price’s and
conditions for the materials specified in the RFQ for a predefined
period of time.
– In SAP the RFQ and the Quotation will be become a single document, you will enter
the vendor’s response in the RFQ you created.

CT104-3-2 & IBPSES Material Management SLIDE 27

 Vendor Evaluation once Identified

• Vendor evaluation helps purchasing evaluate vendors for sourcing

while also enabling the company to monitor vendor relationships
through performance scores and criteria you put in place.
– Supports a maximum of 99 main criteria and 20 sub criteria for each main:
• Price
– Price Level
– Price History
• Quality
– Goods Receipt
– Quality Audit
– Complaints/Rejection level
• Delivery
– On-time delivery performance
– Quantity reliability
– Compliance with shipping instructions
– Confirmation Date
– You then must establish a scoring range (1 -100) and determine the weight factors
of scores for each.
CT104-3-2 & IBPSES Material Management SLIDE 28
 Purchase Order

• A purchase order is a formal request to a vendor for a specific

material or service under the stated conditions

• Purchase Orders can be created manually

– Reference a Purchase Order
– Reference a Purchase Requisition
– Reference a RFQ/Quotation
– Without Reference

• Purchase Orders can be create automatically

CT104-3-2 & IBPSES Material Management SLIDE 29

 Purchase Order

• A purchase order can be used for a

variety of purposes, the item
category (procurement type)
defined in the PO will dictate the
use of the order and the process
that the order will follow:
– Standard
• Stock or Consumption
– Services
– Subcontracting
– Third-Party
– Consignment

CT104-3-2 & IBPSES Material Management SLIDE 30

 Purchase Order Structure

Header

Vendor Date
Doc. Number Currency
Terms of Payment PO Price
Item Overview

Purchase Materials Price/UofM

Order Quantities
Delivery Date
45......01
Line Item
PO History Tolerances
Line Price
Delivery Schedule

CT104-3-2 & IBPSES Material Management SLIDE 31

 Purchase Order Output

• Once a Purchase Order has been created the vendor needs to be

notified
– Printed
– E-mail
– EDI
– Fax
– XML

• There are a variety of forms that aid in the purchasing process and
are generated from the Purchase Order
– Purchase Order Output
– Order Acknowledgement Forms
– Reminders
– Schedule Agreements
CT104-3-2 & IBPSES Material Management SLIDE 32
 Goods Receipt

Purchase
Order
45......01

Notify Vendor

Vendor

Goods Shipment
Receipt

CT104-3-2 & IBPSES Material Management SLIDE 33

 Goods Receipt

• Goods movement in which we accept goods into our system

• If materials are delivered against a Purchase Order we will reference

that Order
– Determine if we got what we ordered
– System can purpose data for us from the PO
• Material, quantity
– Purchase Order History is update with the receipt
– Updates Physical Inventory
– Updates Inventory G/L Account

CT104-3-2 & IBPSES Material Management SLIDE 34

 Material Movements

• When a goods movement takes place it is represented by a

Movement Type

• Movement types are three-digit keys used to represent a movement

of goods
– 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

• Destinations for Receipt of Goods

– Warehouse – Unrestricted, Quality, Blocked
CT104-3-2 & IBPSES Material Management SLIDE 35
 Effects of a Goods Receipt

• When a Goods Movement for the receipt of goods takes place a series
of events occur
– Material Document is Created
– Accounting Document is Created
– Stock Quantities are Updated
– Stock Values are Updated
– Purchase Order is Updated
– Output can be generated (GR slip / pallet label)

CT104-3-2 & IBPSES Material Management SLIDE 36

 Invoice Processing

• Incoming Invoices are reference against

a Purchase Order to verify their content, prices, and arithmetic.

Purchase order
• If discrepancies arise between the purchase order - Target quantity
- Target price
or goods receipt and the invoice the system with
generate a warning or an error
– Depending on system configuration the difference
could cause the system to Block the Invoice
Invoice receipt Goods receipt
- Actual price - Actual quantity

CT104-3-2 & IBPSES Material Management SLIDE 37

 Invoice Processing

• When an invoice is saved it applies the liability from the Goods

Receipt of our Purchase Order to a Vendor

• Upon verification the:

– Purchase Order is updated
– Material Master is Updated (MAP)
– Accounting Document is created

• Once the Invoice has been posted the verification process is

completed and the payment process is initiated within Financial
Accounting

CT104-3-2 & IBPSES Material Management SLIDE 38

 Payment to Vendor

• Can be done automatically or manually

– Post Outgoing Payment vs. Payment Program

• Elements of the Payment Transaction:

– Payment Method
– Bank from which they get paid
– Items to be paid
– Calculate payment amount
– Print payment medium

• Process will create a financial accounting document to record the

transaction
CT104-3-2 & IBPSES Material Management SLIDE 39
 Goods Receipt / Invoice Receipt
Reconciliation Account

Purchase requisition No impact on

Financial Accounting (FI)
Purchase order
Materials Management (MM)
and Financial Accounting (FI)
Goods receipt via automatic account
assignment

Inventory GR / IR
Dr Cr Dr Cr
$100 $100

CT104-3-2 & IBPSES Material Management SLIDE 40

 Goods Receipt / Invoice Receipt
Reconciliation Account

Amount owed is
Invoice receipt assigned and transferred to
vendor account payable

GR / IR Vendor A/P
Dr Cr Dr Cr
$100 $100

CT104-3-2 & IBPSES Material Management SLIDE 41

 Vendor Payment

Amount owed is paid to

Bank vendor and account payable
is reduced

Bank Vendor A/P

Dr Cr Dr Cr

$100 $100

CT104-3-2 & IBPSES Material Management SLIDE 42

 FI – MM Integration Point

Goods Invoice Payment

Receipt Receipt Program
AP
Inventory GR / IR (Vendor) Bank
Dr Cr Dr Cr Dr Cr Dr Cr

$100 $100 $100 $100 $100 $100

CT104-3-2 & IBPSES Material Management SLIDE 43