Materials Management Date: 29-12-2012

http://sap-materialmanagement.blogspot.in/2009/08/creating-purchasing-organization.html

Creating Company code:

1 ) Type SPRO in Command Field and press enter

2 ) Now Click on Sap Reference IMG

3 ) Now go to Enterprise Structure -->Definition-->Financial Accounting--> Edit,

Copy, Delete, Check Company Code and click on it .

4 ) Now click on Copy,Delete,Check Company Code.

5 ) Now Click on Copy As and in From Company code field give 0001 (Its a Standard

Company Code in SAP ) and in To Company Code field give Z001 , and press enter .

Your company code Z001 will be automatically created .

Creating Plant:

1. Type SPRO in command field and press enter.

2. Click on SAP Reference IMG or press F5

3. Follow the path Enterprise Structure --> Definition-->Logistics General--

>Define, copy, delete, check plant-->Copy, delete, check plant

4. Click on Copy as In From Plant give any standard plant and in To Plant give your

Plant number. It will copy all data from standard plant .So you dont have to maintain

much data. But if you dont want to copy all data from the Standard Plant follow the

following path IMG--> Enterprise Structure -->Definition-->Logistics General--

>Define, copy, delete, check plant-->Define Plant. Here you can change your Plant

details also , like plant address.

Assigning Plant to Company Code:

1. Type SPRO in command field and press enter.

2. Click on SAP Reference RMG or press F5

3. Follow the path Enterprise Structure--> Assignment--> Logistics General-->

Assign plant to company code.

4. Here assign the Plant to the intended Company Code

Creating Storage Location:

1. Follow the path Enterprise Structure--> Definition--> Materials

Management--> Maintain storage location.

2. Give your plant number (A storage location can not exist without a Plant. Its why at

the time of creation of storage location it will ask the plant for which you want to create

the storage location )

Create Purchasing Organization:

1. Follow the path Enterprise Structure--> Definition--> Materials Management--

> Maintain purchasing organization.

2. Now click on New Entries, Give Purchasing Organization number and description.

Assign Purchase organization to Company code:

1. Follow the path Enterprise Structure--> Assignment--> Materials Management-

-> Assign purchasing organization to company code.

2. Here assign your Purchasing Organization to your Company Code

Assigning Purchase Organization to Plant:

1. Follow the path Enterprise Structure--> Assignment--> Materials Management-

-> Assign purchasing organization to plant

2. Here assign your Purchasing Organization to your Company Code

Creating Purchasing Group

1. Follow the path Materials Management--> Purchasing--> Create

Purchasing Groups

2. Click on New Entries, Give purchasing Group No. , Description and other

details like telephone no. , Fax No.

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Physical Inventory:

What is Physical Inventory?

The process of counting physical inventory, posting corresponding document and

posting the difference is called Physical Inventory.

Why we do physical inventory?

To know the correct stock in hand. Due to some inconvenience (like some materials

have been stolen or broken) it may happen that the stock reflecting in sap system

differs from the actual stock in storage location. Physical inventory is then carried out

to synchronize the stock in hand with the stock reflecting in SAP system.

2. In many countries there is a law that Company have to do physical inventory to

check the current stock in hand and that stock or assets is taken into consideration in

Companys financial statement.

At which level Physical inventory is carried out?

1. Material

2. Plant/storage location

3. Batch

4. Special Stock

5. Stock type

(These levels are called stock management unit. These are all an IM level. At WM level

physical inventory is carried out at storage type and storage bin level)

Standard process flow of Physical Inventory

Create Physical Inventory Document MM01

Enter the Count MM04

Post the difference MM07

Alternative process flow of Physical Inventory

Create Physical Inventory Document MI01

Enter Count MI04

Recount MI11

Enter the Count MI04

Post the difference MI07

Enter Count + Create physical Inventory Count MI09

Post the difference MI07

Create Physical Inventory Document MI01

Enter Count + Post the difference MI08

Create Physical Inventory Document enter Count, Post the difference MI10

Important Tcodes in Physical Inventory

MI01 Create Physical Inventory Document

MI02 Change Physical Inventory Document

MI03 Display Physical Inventory Document

MI04 Enter Inventory Count with Document

MI05 Change Inventory Count

MI06 Display Inventory Count

MI07 Post Inventory differences

MI08 Create List of Differences with Doc.

MI09 Enter Inventory Count w/o Document

MI10 Post document, count and difference

MI11 Recount Physical Inventory Document

MI12 Display changes

MI20 Print List of Differences

MI21 Print physical inventory document

MI22 Display Phys. Inv. Docs. For Material

MI23 Disp. Phys. Inv. Data for Material

MI24 Physical Inventory List

MIAD Delete Phys. Inv. Documents

MIAR Archive Phys. Inv. Documents

MIDO Physical Inventory Overview

MB51 Material Document List

Physical Inventory Document

From a Physical Inventory document we can get the following information

1. Where the counting has been taken place ( eg Plant , storage location0

2. Count date

3. Which are the materials to be counted

4. The status of the items

5. The status of the Physical Inventory Document

6. The stock types to be counted

Post difference

1. When inventory difference is posted a Material document and if the material is

valuated material then an accounting document is also posted.

2. A tolerance group for each user group can be maintained so that cone cannot post

more than that difference .Tolerance group is maintained in IMG -> Materials

Management -> Inventory Management and Physical Inventory -> Physical Inventory ->

Define Tolerances for Physical Inventory Differences (Tcode OMJ2).

3. While posting the difference, one can maintain the reason for posting the difference

also.

4. Be careful when posting the difference. The posting date should lie in the same

posting period of the count entering date .If backposting is allowed the you can post the

difference in following period also . If your posting date of the post difference is not

satisfying these two conditions then you cannot post the difference.

Some important terminologies and settings in Physical Inventory

Posting Block When you check the posting block check box for any physical inventory document, it will

not allow any goods movement until the count results are posted. If you allow goods

movement during counting inconsistency in counting result may occur due to that goods

movement. So it is best practice to block the goods movement during counting.

Freeze book Inventory

When you check the freeze book inventory check box for any physical inventory

document, it will allow goods movement but that will not reflect in the system until the

count results are posted. If the time lag between physical inventory document creation

and counting is high, this indicator is set, so that business can go on with goods

movement. To use freeze book inventory you have to enable it by following the path

given below.

IMG -> Materials Management ->Inventory Management and Physical Inventory ->

Physical Inventory -> Allow Freezing of Book Inventory Balance in Storage Location.

If you dont enable it and try to check Freeze Book Inventory while creating the

document or changing the document then system will through the following error

Freezing of book inv. balance in stor. loc. is not allowed Message no. M7764

Adjusting book inventory

This is a customizing setting. These setting controls the system behavior when a

material is subjected to active physical inventory goods movement of the same inventory

has been posted. To set this indicator follow the path given below.

IMG -> Materials Management ->Inventory Management and Physical Inventory ->

Physical Inventory -> Settings for Physical Inventory

Batches with deletion flag If you wish to include those batches of a material that are flagged for deletion in the

physical inventory document check this check box.

Business example of Physical Inventory count with solution

Example 1: In your Plant 0001 , storage location 0001 there are 10 nos. of material XYZ according to the SAP system .But physically the quantity is different ( assume only 6

nos. of the material exists in that storage location .Do the physical inventory and post

the difference. And also block the goods movement during the counting.

Solution:

1. Create Physical Inventory document. Type MI01 in command filed and press enter.

In plant field give 0001, storage location filed give 0001.

Press enter.

In material field give material no XYZ and press enter ( if the material is batch managed then enter the batch

also )

Save the document.

Note down the document no.

2. Block the goods movement Type MM02 in command filed and press enter.

Give the physical document number created in 1st step and press enter.

Click on header (the CAP button ) or press shift + F4

Check the Posting block check box

Save the document.

3. Enter the count Type MI04 in command field and press enter.

Give the Physical Inventory document no. and press enter.

In the quantity field in the line item containing material XYZ give 6 and press enter.

Save the document.

4. Post the difference Type MI07 in command field and press enter.

Give the Physical Inventory document no. and press enter.

In the reason field give 3 (damaged) and press enter.

Post the document.

Note down the material document no.

5. Optional but some important steps. Check the stock of material XYZ using TCode MMBE.

Check the movement type of the material document generated in step 5.Type MB03 in command field. Press

enter .Give the material document no. and press enter. Note that the movement type is 702.

Check the accounting documents ----In MB03 on accounting documents. Note the accounting entries. In this

case your Inventory account should be credited and Loss-difference account should be debited.

Price Control

How the materials will be valuated is depends on the price control indicator in material master record. There

are two types of price control indicator.

1. Standard price 2. Moving average price

Standard Price: When we select the standard price control indicator (S) in the material master record, any posting made to

stock account is done at this price. While posting to stock account this price is taken as a standard. Thats why

it is termed as standard price. Standard price of a material remains constant for atleast one period.

Any variance is posted to price difference account.

Variances are updated in moving average price for statistical purposes.

Advantage of Standard Price:

As this price is constant for at least one period, it ensures the consistent cost management of

production process and makes variances within production transparent.

Disadvantage of Standard Price:

As this price is constant for at least one period, it does not reflect the actual cost incurred during

the period. If the procurement price of the material changes greatly in that period, it can lead to

an improper valuation price.

Moving average price:

When we select the Moving average price control indicator (V) in the material master record, any

posting made to stock account is done at their actual price (as per purchase order, goods receipt,

settlement etc.). With this price control indicator, a new material price is calculated after every

goods movement, invoice, and /or order settlement. This material price is an average value

calculated from the total inventory value and the total quantity of the material in stock. This is why

it is termed as moving average price.

Advantage of Moving average price: The material price is updated any price variance in in-house production as well as external

procurement.

Disadvantage of Moving average price: 1. The main disadvantage of using the moving average price is that the price used to valuate a

material consumption is almost completely dependent on the time at which the goods issue is

posted in the system. Suppose we have done a goods issue and after that an invoice. But in this

case the invoice value will be not reflected in the value of material issued .So the material is not

valuated with its actual cost.

2. The moving average price can lead to an unrealistic price.

3. The moving average price is not period dependent. This can lead to a incorrect material

valuation price .For example goods movement posting that are done in previous period is not

valuated at the price form previous period indeed it is valuated at current price.

When to use Standard price and when to use Moving average

price: Some times it is very confusing when to use Standard price and when to use Moving average

price.

The key for selecting the price control for a particular material is the fluctuation of the price of

that material .If the prices fluctuates frequently then assign it to moving average price and if not

then assign it to Standard price. SAP does not restrict you to choose the price control for a

material but strongly recommends using Standard Price for Semi-finished and Finished materials(

for more details refer to SAP Note 81682) . It is also recommended to use moving average price

for those materials which are procured externally and standard price for those materials which are

produced in-house.

Example 1:

Posting at Standard Price:

1. Initial situation :

Material is valuated at standard price.

Standard price = 10 INR

Total stock value 10*10 INR= 100 INR

Moving average price = 10 INR

2. GR done for PO

GR quantity =10 EA

GR price per unit = 12 INR

Initially the total stock value was 100. Now GR has been done for 10 materials at price

12 INR.

The new total stock value= (100+ 10*10 )INR=200 INR

Standard price =10 INR(remains constant )

Moving average price = (100+10*12)/(10+10)=11 INR

As the good receipt is done at price 12 INR, GR/IR account will be credited by 10*12

INR = 120 INR.

Difference of (120-100) INR =20 INR would be posted to price difference account.

3. IR done for PO

IR quantity =10 EA

IR price per unit = 11 INR.

As the price control of the material is Standard, the total stock value remains same.

Standard price =10 INR(remains constant)

Moving average price =(100+10*11)/(10+10) INR= 10.5 INR

At the time of goods receipt GR/IR account was credited by 120 INR. Now for balance

at the time of Invoice GR/IR account will be debited by 120 INR , vendor account will be

credited by 110 INR and the difference (120-110) INR = 10 INR will be credited to price

difference account.

Example 2:

Posting at Moving Average Price:

1. Initial situation :

Material is valuated at Moving average Price.

Total stock value 10*10 INR= 100 INR

Moving average price = 10 INR

2. GR done for PO

GR quantity =10 EA

GR price per unit = 12 INR

Initially the total stock value was 100. Now GR has been done for 10 materials at price

12 INR. The new total stock value= (100+ 10*12 )INR=220 INR

Standard price =10 INR(remains constant )

Moving average price = (100+10*12)/(10+10)=11 INR

As the good receipt is done at price 12 INR, GR/IR account will be credited by 10*12

INR = 120 INR.

There will be no posting at price difference account as stock account and GR/IR

clearing account is respectively debited and credited by the same amount.

3. IR done for PO

IR quantity =10 EA

IR price per unit = 11 INR.

As the price control of the material is Moving average price and the IR price is less

than GR price, stock account id credited by IR quantity * (GR price IR price) = 10*(12-

10) INR = 10 INR.

Standard price =10 INR(remains constant)

Moving average price =(100+10*11)/(10+10) INR= 10.5 INR

At the time of goods receipt GR/IR account was credited by 120 INR. Now for balance

at the time of Invoice GR/IR account will be debited by 120 INR , vendor account will be

credited by 110 INR and remaining (120-110) INR = 10 INR will be credited to stock

account.

Moving average price and price difference account:

Whenever there is a price variance during goods posting or invoice posting, in case of

standard price, a price difference account is being hit to nullify it.

When the price control is moving average price there are also some cases when price

difference account is hit. To understand under what circumstances price difference

account is being hit inspite of moving average price as price control indicator go through

the below mentioned example.

Example 3: Initial Situation:

Moving average price: 10 INR

Total stock quantity: 10 EA

Total stock value: 100 INR

Now an invoice for 40 material with price variance of 5 INR ( ie the invoice price per unit = 10 INR- 5 INR =5INR )

have to be posted . So the stock account should be credited ny 5*40 INR = 200 INR . But the total stock value is

100 INR.

In this case the system credit the stock account by 10*5 INR =50 INR, and post the remaining 30*5 INR = 150

INR to price difference account.

Negative moving average price Sometimes we can not post an invoice due to error like Moving average price for material is negative: Mat

XXX plant yyy. , message no. M8783.

To understand why this kind of situation happens, go through the following example.

Example 4: Initial situation:

Moving average price: 10 INR

Total stock quantity: 10 EA

Total stock value: 100 INR

Now you create an invoice for same material with quantity 6 EA and price 30 INR .So the price variance is (30 -

10) INR = 20 INR. In this situation at the time of invoice posting the stock account should be credited by 6*20 INR

= 120 INR.

But total stock value is only 100. So the system can not deduct 120 INR from 100 INR because that will lead to a

negative stock value, which in turn lead to a negative moving average price. For this reason the system throws

Error message no. M8783 and prevents the posting.

Now here one question may arise that why system is not posting the rest amount to PRD account.

The answer is very simple. If the system allows us to post the invoice by posting the difference to PRD account

then 100 INR will be credited from stock account and 20 INR will be credited to PRD account. But then total stock

= 10 EA, and total stock value =0. This leads to a zero moving average price which again may lead to an error

during inventory postings.

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Valuation area

valuation area : Valuation area means at which level material is valuated . Some cool facts about valuation area :

1 . There are two valuation areas at which a material can be valuated

At company code level

At plant level

2 . If valuation is at plant level we can valuate a material at different price at different

plants.

3 . When we valuate a material at company code level the price remains same for all the

plants in that company code.

4 . if we are using Production planning or production cost accounting components or if

our system is a Retail system then valuation in plant level is mandatory .

5. Do not play with the valuation level . Once it is set at one level it is very difficult to

change it .

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SAP Organizational Structure

Business Scenarios Main Elements

Business Scenario: Business-related grouping of business processes localized in a specific organizational area that share some similar goals in an enterprise, such as purchasing, services, balance sheet preparation,

production, personnel administration, and so on.

Organizational Unit: Organizational grouping of enterprise areas which, for legal reasons or for other specific business-related reasons or purposes, are grouped together. Organizational units include legal

company entities, sales offices, and profit centers.

Master Data: Data which is used long-term in the R/3 System for several business processes. Examples include customers, materials, and vendors.

Transactions: Application programs which execute business processes in the R/3 System such as creating a customer order, posting an incoming payment, or approving a leave request.

Document: A data record that is generated when a transaction is carried out.

Reports: Program which reads certain data elements and displays them in a list.

Organization levels in Procurement :

Client

Definition : 1. Client is a commercial , organizational unit within the R/3 system , with its own data ,masters records , and

set of tables.

2. From a business perspective , the client forms a corporate group .

Some cool facts about the client :

1. Highest hierarchical level in SAP

2. All areas of an organization that are to be integrated into the SAP R/3 production system should be included

under one client

3. There is a common set of rules in one client

Common tables

Common master files

Common databases

4. Standardized Data Across the client

A vendor number and name is common across the client

A customer is common across the client

A general ledger number and description is common across the client

A material number and description is common across the client

Company Code

Definition : Its the smallest organizational unit having independent accounting department within external accounting.

Some cool facts about the company code :

1. Balance sheet ,Profit loss statement s require by law are created at company code level.

2. We can create several company codes in one client in order to manage various separate legal entities.

3. To create a company code we can easily copy the standard one and then customized it.

Plant

Definition : 1. It is a logistic organizational unit that divides the enterprise from the perspective of production ,

procurement , plant maintenance and material planning.

2. Its a manufacturing facility or branch within a company code.

Some cool facts about a plant :

1. When creating a plant just copy the standard plant which automatically make the entry in the plant table

and all others depended tables .

Storage Location

Definition : Its the organizational unit which allows the differentiation of material stocks within a plant

Some cool facts about a storage location:

1. Inventory management at quantity basis in carried out at Storage location level in a plant.

2. A storage location cant exist without a plant.

3. One storage location can be assigned to only one plant.

So is it the end of the basic structure ? The answer is nooooo . What do you do with a Television without cable connection? How do you see the

channels? Till now the television part is done. Now lets see what the cable part of it is. The cable which links

the organizational units with the external word is Purchasing organization with the help of Purchasing group.

Purchase Organization :

Definition: It is an organizational level which negotiates conditions of purchase with vendors for one or more

plants

Some cool facts about a Purchasing Organization:

1. It is responsible for companys purchase requirement.

2. There are three types of Purchasing Organization.

Plant Specific : One Purchasing Organization is responsible for only one Plant.

Company Code specific : One Purchasing organization is responsible for whole the company as well as its all

plants .

Cross-company code specific : One purchasing organization is responsible for one or more company codes

and all theirs plants.

3. One purchasing organization can be assigned to one or more plants.

4. One plant can be assign to one or more Purchasing organizations.

Purchasing Group :

Definition : Its the key for buyer or group of buyers responsible for certain purchasing activities .

Some cool facts about Purchasing Group :

1. We do not assign a purchasing group to any purchasing organization .It enables us to use any purchasing

group for any purchasing organization .

Changing Logo on SAP Easy Access Screen

http://www.saptechnical.com/Tutorials/Others/Logo/Index.htm

SWM0 Txn. Code

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