SAP MM Organizational Structure

Materials Management (MM)

• A SAP ERP module designed to aid organizations with material, inventory, and warehouse management within the supply chain.
• Covers supply chain tasks like consumption-based planning, planning, vendor evaluation, and invoice verification.

MM Organizational Structure

• Divides into Materials Management and Purchasing.
• Materials Management: Includes Client, Company Code, Plant, and Storage Location as organizational units.
  • Client: It is an independent environment in the system.
  • Company Code: The smallest orgainzational unit where a legal set of books is maintained.
  • Plant: Also known as Delivering Plant, operating area or a branch within a company including manufacturing, distribution, purchasing, or maintenance facilities.
  • Storage Location: Differentiates various material stocks in a plant.
• Purchasing: Includes Purchasing Organization and Purchasing Group as organizational units.
  • Purchasing Organization: The buying activity for a plant takes place, responsible for services and material procurement, also negotiates purchase conditions with vendors.
  • Purchasing Group: Represents the buyer or group of buyers responsible for specific purchasing activities, and communication channel for vendors.

MM Master Data

• Consists of Vendor Master Data, Material Master Data, Purchasing Info Record, Condition Master Data, and Output Master Data.

Vendor Master

• Contains all necessary information for business with external suppliers, maintained by Purchasing and Accounting Departments.
• Each vendor requires a master record; supplier master record in SAP S/4HANA is a central business partner master record with different roles.
• Divided into three views: Client Level, Company Code Data, and Purchase Org Data.
  • Client Level: vendor address, vendor number, and preferred communication.
  • Company Code Data: reconciliation account, terms of payment, and bank account.
  • Purchase Org Data: purchasing currency, salesman's name, and vendor partners.

Material Master

• Contains all data to manage a material.
• SD Material Master is the same as the MM Material Master; components within the SAP system also use the MM Material Master.
• Material master data is stored in Views such as Sales Data, Purchasing Data, Material Planning Data, Forecasting Data, Storage Data, Controlling Data, Quality Data, and Accounting Data.
• Divided into three areas: General Information and Sales.
  • General Information: Contains material information relevant to the entire organization, for example, material name, weight, and unit of measurement.
  • Sales: Contains specific details on the Delivery Plant and Loading Group, such as Storage Location information about the Stock Quantity.

Purchasing Information Record

• Allows buyers to quickly identify vendors that have offered specific materials.
• Functions as the default information for Purchase Orders and establishes the relationship between a vendor and a material.
• Contains data on pricing, conditions, last purchase order, tolerance limits for delivering, specific lead times, availability periods, and vendor evaluation data.

MM Processes

• The MM Processes, specifically the Procure-to-Pay process steps include:
  • Purchase Requisition
  • Vendor Selection
  • Purchase Order
  • Notify Vendor
  • Vendor Shipment
  • Goods Receipt
  • Invoice Receipt
  • Payment to Vendor

Purchase Requisition

• Internal document which instructs the purchasing department to request specific goods or services for a specified time.
• Created in two ways, Directly (manually) or Indirectly (automatically).
  • Directly (manually): A person determines the what, how much, and when of the request.
  • Indirectly (Automatically): Includes Materials Request Planning (MRP), Production Order, Maintenance Order, and Sales Orders.

Requisition Sourcing

• Requisition released for processing once assigned to a Source of Supply.
• Purchasing department determines the appropriate Source of Supply through:
  • Internal Sourcing Requirements
  • Source List
  • Outline Agreement
  • Request for Quotation (RFQ)

Internal Sourcing

• Requisition for materials satisfied by company internal Sources such as:
  • A plant within the firm representing a potential supply source for the material needed that is a centralized warehouse.
  • Requirement covered by an internal procurement transaction (stock transport order) if an internal source is identified.

Source List

• Record specifying the allowed ways to procure material for a plant within a period.
• If the list contains a sole source, the system assigns the vendor to the requisitions.
• The system will display a list of vendors if several options exist.
• If no source has been established, the system will revert to searching information records and outlining agreements.

Outline Agreement

• Requisitions satisfied through existing longer-term purchasing agreements, broken down in contracts and scheduling agreements.
  • Contracts: Items defining individual materials, material groups, or services with prices and in quantity.
  • Scheduling Agreements: Showing how the total amount of material is spread over a period in a delivery schedule, consisting of line items indicating quantities and delivery date.

Request for Quotation (RFQ)

• Invitation to a vendor by a Purchasing Organization to place a bid to supply materials or services and it's submitted to vendors if nothing exists in the system.
• The RFQ process includes:
  • The accepted quotations will generate Purchasing Information Records.
  • Perform Quotation Price Comparisons.
  • Select a Quotation.

Quotation for Vendor

• Invitation received by the vendor is a legally binding offer, and contains prices and conditions for materials in the RFQ for a predefined period.
• The RFQ and the Quotation become a single document in SAP, the vendor's response is entered in the created RFQ.

Vendor Evaluation

• Helps purchasing evaluate vendors for sourcing while enabling the company to monitor vendor relations through performance scores and criteria.
• Supports an evaluation of a maximum of 99 main criteria and 20 sub-criteria for each main.
  • Price, includes the Price Level and Price History as sub-criteria.
  • Quality, includes Goods Receipt, Quality Audit, and Complaints/Rejection level as sub-criteria.
  • Delivery, includes On-time Delivery Performance, Quantity Reliability, Compliance with Shipping Instructions, and Confirmation Dates are the sub-criteria.

Purchase Order

• Formal request to a vendor for specific material or service under stated conditions, created manually and automatically.
• The item category (procurement type) in the Purchase Order dictates the use and process of the order through Standard, Services, Subcontracting, Third-Party, or Consignment.
• Forms generated from the Purchase Order include Purchase Order Output, Order Acknowledgement Forms, Reminders, and Schedule Agreements.

Goods Receipt

• Deals with the goods movement wherein goods are accepted into the system.
• Goods movement is represented by a movement type, three-digit keys representing a movement of goods, for example:
  • 101 – goods receipt into the warehouse
  • 103 – goods receipt into Goods Receipt blocked stock
  • 122 – return to delivery vendor
  • 231 – consumption for a sales order
  • 561 – initial entry of stock
• Destinations for Receipts of Goods include a warehouse, quality, and goods receipt blocked stock.
• During a Goods Movement for the receipt of goods the following are included:
  • Material Document is created
  • Accounting Document is created
  • Stock Quantities are updated
  • Stock Values are Updated
  • Purchase Order is Updated
  • Output can be generation in Goods Receipt slip or pallet label

Invoice Processing

• References against a Purchase Order to verify their content, prices, and arithmetic.
• Discrepancies between the purchase order or goods receipt and the invoice, will generate a warning or an error that will cause the system to block the invoice depending on the system configuration.
• When an invoice is saved, it applies the liability from the Goods Receipt of the Purchase Order to a Vendor.
• Upon verification, the purchase order and the material master are updated, and the account document is created.
• Once the invoice has been posted, the verification process is completed, and the payment process is initiated within Financial Accounting.

Payment to Vendor

• Automatically (post outgoing payment) or manually (payment program) processed that create financial accounting document to record the transaction.
• Elements of the Payment Transaction:
  • Payment Method
  • Bank from which they get paid
  • Items to be paid
  • Calculate payment amount
  • Print payment medium