MATERIAL MANAGEMENT

This management comprises of:

Procurement Inventory management External service management Invoice verification Stock verification Valuations

Procurement: PR (Purchase requisitions): Purchase requisitions are generated by the planning

department and are further classified as follows. Manual Planning. Planning /MRP (Material requirement planning).

Consumption based planning. Forecast based planning. Production based planning.

Purchase requisitions are based on 4 domains: Materials. Date of delivery. Receiving or storage location. Quantity.

Consumption based planning: Firstly a planned order will be generated from the planning department based on the consumption.

Forecast based management: In this management we need to maintain last 6 to 10 months of the consumption data in the master data.

1/5/2

002

1/6/2

002

1/7/2

002

1/8/2

002

1/9/2

0020

20406080

100120140160

0

1

2

3

4

5

6

Volume

Close

These are further classified as follows: Trend model. Seasonal forecasting. Time phased. Constant.

Production based Planning: This is also termed as SOP (Sales operation planning) based on SOP production MRP generates the requirement and will check the inventory management and then the system generates the PR (Purchase requisitions).These are again classified into two groups:

MRP controller. MRP Groups.

Further the MRP (Material requirement planning) are termed as per the specification of goods in SAP system and are as follows:

Finished goods – FERT Raw materials – ROH Utilities – HIBE Water/gas etc – PIPE LINE Packing material – VERP Spares – ERSA Semi finished goods – HALB Scrap (Non evaluated goods) – UNBW

Purchasing document structure:

This structure can also be termed as RELEASE STRATEGY.

The standard practice for document structure in SAP practice is as follows: NB – Standard document type provided by the SAP. ZCAP – For capital goods. ZRAW – For raw materials. ZSPR – For spare goods. ZSRV – For service goods.

PURCHASING DOCUMENT STRUCTURE

ORGANIZATIONAL LEVEL DATA

COMPANY CODE

PURCHASING

PURCHASING GROUP

ITEMITEM DETAIL &

ITEM CATEGORY

All these materials are related to production based planning and will

come under BILL OF MATERIALS/QUANTITY.

OEM (Fixed vendors/contractor): PO can be issued with reference to PR/RFQ/Contract.Based on the RFQ’s 1

2 3

Quotation dead line will be generated.

&

Collective number data will be generated.

SOURCE LIST: To check whether a party is approved or not then we need to go with the following path in the SAP system.

PRICING PROCEDURES: This includes the terms and conditions for the contract. VENDOR EVALUATION: This includes a structure to evaluate the vendors.

MATERIAL MASTER

PURCHASING INFO RECORD

CONDITIONAL RECORDS

With reference to PR

INVENTORY LEVELS: MAXIMUM LEVEL

ROL (RE-ORDER LEVEL)

MINUM LEVEL

LOT SIZES: These lot sizes are one of the field view in the MRP(Material Requirement Planning) and are as follows:

Fixed Lot-Size: To maintain fixed quantity in material master. Lot by Lot-Size: There is no need to maintain fixed quantity in the material master. The

system will take the quantity difference between ROL and the current level. Dynamic Lot-Size: Based on the consumption pattern system generates PR.

VENDOR EVALUATION

PRICE

PRICE LEVEL

PRICE BEHAVIOUR

QUANTITY

RELIABILITY

With respect to PO/GR

ON TIME

QUALITY

QM

INVOICE

PRICE VARIATION BETWEEN PO & INVOICE

SERVICE

SUPPORT / COMES UNDER SERVICE MODULE

When the inventory levels comes down from the maximum level to re-order level the system automatically generates the purchase requisitions.

BCS: Budgeting control systems.This is further classified into

Capital budgeting. Revenue budgeting.

DIFFERENT KINDS OF PROCUREMENT: These are dependent on account assignment category. And the other way of procurement is cash purchase or blanket procurement. This is derived under item category “B”. For this type of procurement invoice is not required.

Sub-contracting: In this the item category is “L” and the account assignment is block. Stock transfer: In this the item category is “U” and the account assignment is block. Stock item procurement: In this the item is block and the account assignment is

category “K”. Tolerance key: The upper limit and the lower limit are mentioned.

Master data: This master data comprises of: Base unit of measure Purchase unit of measure Issue unit of measure Sale unit of measure Warehouse unit of measure

Purchasing value key: Apart from the tolerance we can also use maintain values to remind the purchase orders.

Reminders: 1 week before delivery date.2 days before delivery date.2 days after delivery date.

Delivery complete indicator: It is used to update pending supply or left out goods. Return purchase order: It is used to return the balance material against the purchase order.

In this control system the profit centre and fund centre are derived and then the funds are allocated

within the enterprises. This control system is the relation between the procurement and the fund centre.

This is a conversion factor in which the alternate unit of measure can be derived.

All these are compared with the base unit of measure.

Import procurement: These are further classified as, BCD: Basic custom duty CVD: counter valuing duty ACD: Additional customizing duty

Edd cess Secondary Edd cess

CONTRACTS: These are of two types Value contracts (WK) Quantity contracts (MK)

In these contracts the start and end period or the validity of the contracts are reflected. And these come under DMS (Document Management system).

Standard RFQ – AN

GP Bidding – GP (Commission based)

SCHEDULING AGREEMENT: For this type of agreement there is no need to PO but scheduling dates must be provided with respect to MRP we can release the agreement.

DELIVERY COST:PBOO Basic priceFRAI Freight (Transporter charges includes labor & machinery)INS Insurance (Insurance provider)ZOB Customs (Indian customs Authority)CNF C&F Agent (Clearing and forwarding)OFR Ocean freightFOB: Free on Board – all these comes under client scope including applicable taxes and insurances.CIF: Carry and insurance freight includes ocean and transit insurance and will be paid by the vendor.FREIGHT: Depends on “%”, quantity, lumsum value.DISCOUNT: While defining the terms and conditions we need to indicate whether the discounts are on the +ve or –ve condition.

Possibilities@GRlevel this is used for an unknown transporter or a vendor related to transportation. For which we need to assign a blank condition in the GR so that at the time of invoice we can assign the vendor in the system.

SERVICE PROCUREMENT: To this we need to maintain service master record. Individual services are grouped into standard service catalog (SSC) or model service specification (MSS) all these services are not stock able items.

These come under International commercial terms.

VENDORS: Local vendors Import vendors Service vendors Statutory vendors Affiliated vendors Employee vendors One time vendors

It is a supplier & customer relation and comes under stock transfer.

These vendors are Tax and customs authorities.

All these vendors are allocated with a number range type& then assigned to each other.

OTV code: Vendor name and address to be provided against the petty procurement. INVENTORY MANAGEMENT:

Stock Handling. It is a 2 digit numeric code that indicates the movement type / transaction

type. Different movement types / commonly used T - Codes:

101 GR – single step.

103 GR into blocked stock.

105 Release from blocked stock.

201 Goods issue.

301 Transfer from plant to plant.

321 Transfer from material to material.

561 Initial entry.

501 Goods receipt without PO.

511 Goods receipt without PO and without value.

711 Stock adjustment (+ve).

712 Stock adjustment (-ve).

All these vendors come under vendor account groups. In which

each and every vendor is assigned to account groups.

551 Scrapping material.

102

104

106

202

LSMW: Legacy system migration workbench. It is used for uploading any information to SAP system.

BDC: Batch data communications for critical applications. INVENTORY: Further classified into

Material Document Accounting document GL Account

ValueDebit / Credit

As mentioned above these 3 categories will be derived at the time of MM – FI integration.

VIEWS FOR MASTER DATA:………. Basic data 1 (Includes UOM/ Description/ Qty etc...) 40 digits is the max size.………. Basic data 2………. Purchasing………. Purchasing text [“n” no of entries] more than 40 digits………. Purchasing group………. MRP planning………. Quantity………. Plant data 1

2………. Accounting 1 V – Moving average price.

S – Standard price. 2 Valuation class (4 digit code) will be interfaced with material class.

………. Costing…. VALUATION CLASS:

Valuation classes are derived based on the stocks available or the assets available.

Assigning of valuation class:

Reverse movement type / cancellation.

Consider: Account category Valuation Class

ROH A 1001

HIBE

ERSA STOCK OF SPARES B 1002

FERT STOCK OF FINISHED C 1003

HALB STOCK OF SEMI FINISHED D 1004

VERP STOCK OF PACKING Assign E Assign 1005

The transaction code for assigning valuation class is “OMSK”. PHYSICAL INVENTORY:

MI01 Physical inventory document MI10 Counter results MI20 Posting

MATERIAL REVALUATION: MR21

TRANSFER POSTING: 301 SINGLE STEP - STORAGE LOCATION/STORAGE LOCATION 303/305 DOUBLE STEP - STORAGE LOCATION/STORAGE LOCATION 351/101 DOUBLE STEP - STORAGE LOCATION/STORAGE LOCATION 309 MATERIAL TO MATERIAL

MM – FI INTEGRATION: The transaction code for MM – FI is “OBYC”.

ACCOUNTING DOCUMENTS: GR:

Debit CreditInv GR/IRBSX WRY

GI:Debit CreditConsumption InventoryGBB-VBR

INVOICE:Debit CreditGR/IR Vendor A/C

PAYMENT:Debit Credit

Stock of raw material

Vendor Bank A/C FINANCIAL ACCOUNTING:

These are classified into four groups: ASSETS LIABILITY INCOME EXPENDITURE

MM-FI G/L ACCOUNTS: INVENTORY PRD (PRICE DIFFERENCE ACCOUNT) GAIN / LOSS ACCOUNT PHYSICAL INVENTORY GAIN / LOSS REVALUATION OF MATERIAL GR / IR ACCOUNT CONSUMPTION ACCOUNT CWP / AUC ASSET UNDER CONSTRUCTION

ACCOUNTING DOCUMENTS RECEIPTS:

FOR STOCK - ITEMS:

DEBIT CREDITINVENTORY GR/IR

FOR NON STOCK – ITEMS:

DEBIT CREDITEXPENDITURE A/C OR CONSUMPTION A/C

GR/IR

FOR SERVICES:

DEBIT CREDITEXPENDITURE OR SERVICES A/C

GR/IR

INVOICE: “ MIRO / MRKO / MRRL”

DEBIT CREDIT

GR/IR VENDOR

FOR BLANKET PROCUREMENT:

DEBIT CREDITEXPENSES VENDOR

GOODS ISSUE:

DEBIT CREDIT

CONSUMPTION OR EXPEDITURE A/C

INVENTORY

SUB CONTRACTING:

DEBIT CREDIT

FG – INVENTORY GR/IR

SERVICE EXPENDITURE GR/IR FOR SERVICES

CONSUMPTION INVENTORY FOR BOM

PHYSICAL INVENTORY:

DEBIT CREDIT

INVENTORY GAIN/LOSS ON PHYSICAL INVENTORY

REVALUATION:

DEBIT CREDIT

INVENTORY GAIN/LOSS ON MATERIAL REVALUATION

EXCHANGE RATES:

DEBIT CREDITGAIN / LOSS TP EXCHANGE RATE INVENTORY

RELEASE STRATEGY: CEBAN – PR Header / Item level. CEKKO – PURCHASING DOCUMENT:

RFQ PO Header / Item level. OUT GOING DOCUMENTS CONTRACTS SCHEDULING AGREEMENT

CESSR – SERVICE ENTRY SHEET Header / Item level.

COMMUNICATION STRUCTURE: (SE11) is the triggering base point for release strategy. Based on delegation of authorities the release strategy is derived.

“BETWR” Characteristic Field 1 Release strategy

23 Check doc type from the structure (BLART).4

For value

Characteristic matrix:Doc type – CEBAN

BLARTValue - CEBAN

BMWTRClass 032 MASTER DATA 1. ClassificationZPR_RELEASE 2. Doc type NBDoc type 3. ValueValue

Eg: Consider a matrix derived as below…..

Release strategy Procurement type Value limit Approving authoritiesR1 Materials < 25,000 Proc officerR2 Materials < 1,00,000 Proc officer &

managerR3 Materials < 5,00,000 Proc officer, manager

& general manager.R4 Materials > 5,00,000 Proc officer, manager

& general manager & CEO

R5 Services < 10,000 Proc officerR6 Services < 50,000 Proc officer &

managerR7 Services <1,00,000 Proc officer, manager

& general manager.R8 Services >1,00,000 Proc officer, manager

& general manager & CEO

RELEASE CODES: L1 (LEVEL 1) - Proc officer. L2 (LEVEL 2) - Manager. L3 (LEVEL 3) - GM. L4 (LEVEL 4) - CEO.

Configuration for release strategy: Create class - CL02 Create characteristic - CT04 Classification - CL20N Simulation - CL24N

Define release group - G1 and the assign class - ZPR_Release Define release code - L1 - G1 -Procurement officer.

L2 - G1 -Manager Material.L3 - G3 -GM.L4 - G4 -CEO.

Define release indicator - 1 mark the check box and the description as released.

S UN marks the check box and the description as blocked.

Define release strategy - G1 – R1 up to 25K Assign L1Pre-requisitesRelease statusClassification

Define release strategy - G2 – R2 up to 100K Assign L1 & L2

Pre-requisitesRelease statusClassification

Define release strategy - G3 – R3 up to 500K Assign L1,L2 & L3Pre-requisitesRelease statusClassification

Define release strategy - G4 – R4 above 500K Assign L1,L2,L3 & L4Pre-requisitesRelease statusClassification

STATUSTESE

L1 L2 Until the last person approves it will not allow for further processing. L3 and it displays as follows: L4

Blocked Allowed for RFQ / PO Allowed RFQ only. Allowed PO.

MM – FI INTEGRATION FOR FINANCIAL ACCOUNTING WITH REFERENCE TO INEVNTORY TRANSACTIONS

Automatic account determination is the main settings for the MM-FI integration. Path for Account determination

SPROMaterials managementValuation and account assignmentAccount determinationAccount determination without wizardGroup together valuation areas

Major accounting documents get generated for the following: Inventory transactions. Vendor transactions. Reconciliation A/C “Sundry creditors A/C”.

Sub ledgers (V1), (V2), (V3).FBL1N Display vendor A/C’s.

Intercompany transactions. Cross company clearing a/c is mandatory for Inventory transactions with two

different company codes.

INVENTORY TRANSACTIONS: GR / IR GI TRANSFER POSTINGS SCRAPPING MATERIAL REVALUATION PHYSICAL INVENTORY Movement types like “101 etc” in inventory

transactions are termed as valuation strings. EXCHANGE RATE DIFFERENCES PRICE DIFFERENCES FREIGHT OPENING BALANCE

GL ACCOUNTS:

GR / IR INVOICE PRICE DIFFERENCE CONSUMPTION GAIN or LOSS FROM PHYSICAL INVENTORY GAIN or LOSS FROM MATERIAL REVALUATION GAIN or LOSS FROM EXCHANGE RATES

VALUATION CLASSES: It is a mandatory field for MM-FI. And the T-Code for creating valuation classes is

“OMSK” used to derive valuation classes.

OMSK setting:Material type Acc category ref DescriptionROH 0001 Raw materialERSA 0002 SparesHIBE 0003 ConsumptionFERT 0004 Finished productHALB 0005 Semi finishedVERP 0006 Packing materialUNBW 0007 Non valuated material

It is a single digit and should have to be entered manually.

Based upon the valuation strings & transaction event key and the account modifier the accounting documents are generated.Consider for: GR

1. INV & GR/IR - BSX – WRX ACCOUNT MODIFIER

TRANSACTION EVENT KEY

VALUATION RULES:

These are derived by assigning valuation area to valuation group and then valuation group to valuation group code. And based on the valuation rules matrix will be generated:

Valuation group Account modifier

Valuation class G/L A/c debit G/L A/c credit

Profit centre is the major field to integrate with “CO”.

IMPORT PROCUREMENT

Based upon the INCO terms import procurement will be handled. There are two types in import procurement

FOB - Free on board.This includes material value only insurance and freight value are not included in this.

CIF - Cost insurance freight.This includes both FOB value along with freight and insurance charges.

The major import duties that are involved in this type of procurement are Basic customs duty Additional customs duty C & F agent Ocean freight

CALICULATION FOR IMPORT DUTIES & ITS STRUCTURE:

DOMESTIC PROCUREMENT TAX STRUCTURE

DESCRIPTION TAX REMARKSExcise duty 8% BEDEd cess 2%S Ed cess 1%VAT 4% based on products

14.50%CST 2%Service tax 2%+(X)% if "c" form is provided then "X%" can be exumptedtotal service tax 12% X - 10%Ed cess 2%S Ed cess 1%TDS 194 J 10%

194 C 2%WCT 2% or 4%

For materials Excise duty

Ed cess SE cess

VAT CST

For services

Service tax Ed cess SE cess

TDS Ed cess SE cess

WCT (Work in Contracts) PRICING PROCEDURE:

Sequential conditional procedure is termed as pricing procedure. TAX CATEGORY:

Is used to classify between input tax and output tax. V - In put A - Out put

CHARTER ID:Is used to classify whether a material is excisable or not. And in SAP we call it as “COMODITY No”.

FTXP - Is used to assign tax code. When a credit tax code is derived then a “CENVAT CLEARING A/c” is generated.

Eg: Inv value- 100 Tax - 12

Then

Debit CreditInventory for 100 GR/IR12 – cenvat clearing /c. 112

If “cenvat clearing a/c” is not created then:

Debit CreditInventory for 112 GR/IR will be for 112

MM-FIIn “OBYZ” we can assign tax codes at business wise to G/L accounts.

EXISE REGISTERS:RG 23A PART-I - QUANTITYRG 23A PART-II - QUANTITY AND VALUERG 23C PART-I - CAPITAL GOODS IN BOUNDRG 23C PART-II - CAPITAL GOODS IN BOUNDRG 23D - PLANT TO PLANT DEPOT TRANSFER OF GOODSFORM 57F - SUB CONTRACTINGRG1 - OUT BOUND SALES

ASAP METHODOLOGY:Involves five stages:

Project preparation Project scheduling Project scope Kick-off meeting

BBP (Business Blue Print) Business Discussion (QA & DB) i.e L1 (level 1) presentation.

Organization structure BBP work steps (AS-IS) i.e L2 (level 2) presentation. Testing in sandbox client (TO-BE) Building Blocks solution BMPL-Business process master language. Prepare BBP documents individually i.e as MM-BBP-1.

GAP ANALYSIS: Analysis between AS-IS & TO-BE functionality will be recorded in GAP. BPR: Business process re-engineering activity. REPORT REQUIREMENT: Functional specifications are required for final reporting.

FRICE: Form report interface conversions enhancements. Realization

(Configuring) mapping in golden client in this we should not create any Master data & can be maintained if necessary.

Internal testing (Testing client) we need to pull from golden client T-code is SCC1 with respect to transporting no & client / we can maintain master data.

Master data importance. Master data templates. Core team testing UAT L3 testing. Test script

RUN 01 RUN 02 Sign off / Integration testing with core team. RUN 03

Training Testing manual.

Final preparation Cut-over data. Cut-over strategy.

Go-Line & support FUNCTIONAL SPECIFICATIONS REQUIRED TABLES AND FIELDS:

FV11: To maintain tax condition table. OBYZ: Will maintain tax value. MM PURCHASING PRICING PROCEDURE: