meljun cortes materials management transactions part 2

Unit 13

Materials Management (MM)

- Transactions -

January 2008© SAP AG - University Alliances and The

Rushmore Group, LLC 2008. All rights reserved.

2

Business Process Integration

MM



3

Transaction Data

• Includes internal and external exchanges that describe business activities

• Unlike master data, aggregate transactional data is dynamic – each transaction is unique



4

R/3

FIFinancialAccounting

COControlling

PSProjectSystemWF

WorkflowISIndustrySolutions

MMMaterials Mgmt.

HRHumanResources

SDSales and Distribution

PPProductionPlanning

QMQualityMgmt.PM

Plant Maintenance

SMServiceMgmt.

Client / ServerIntegrated BusinessSolution

ECEnterpriseControlling

AMFixed AssetsMgmt.

Materials Management (MM)



5

Unit 13 – Overview

• A company may want to establish a long term purchasing relationship with a vendor

• Its is accomplished through a purchasing contract (outline agreement or blanket order)

• Purchases of that material from that vendor are then simplified and streamlined



6

Buyer/Supplier Relationships

• Antagonistic – parties view each other as the enemy (lose/lose)

• Adversarial – each party attempts to maximize their gain (win/lose)

• Cooperative – parties understand the benefits of working together (win/win)

• Collaborative – parties look for opportunities to create value (win/win)



7

Buyer/Supplier Relationships

• Long term partnerships are the objective of the supplier evaluation and selection process for contracts

• Traditional purchasing process– Creates an environment of mistrust and low

bidder mentality – Leads to higher total purchasing costs



8

Supplier Evaluation and Selection

• Identify need for long term supplier contract• Determine specific sourcing requirements• Identify potential suppliers• Determine method of evaluating suppliers• Select supplier for contract• Negotiate and execute contract



9

Benefits of Managing the Supply Base

• Contract with only world-class suppliers• The fewer suppliers the lower the purchasing

overhead• Purchasing can pursue strategic sourcing

issues, instead of clerical functions• Streamline the supply chain• Improved overall quality• Improved delivery performance



10

Outline Agreement

• Long-term purchase agreements • Outline agreements can be subdivided into

the following types:– Contracts – Scheduling agreements

• Outline agreements can be subject to a release (approval or clearance) procedure



11

Contract Process Overview

• Step one is to identify and evaluate suppliers• It may involve supplier development• The goals are:– Develop partnerships with good suppliers– Reduce total cost of purchased materials and

services



12

Contracting Questions

• How will potential suppliers be evaluated and selected?

• What procedures will be required to manage the contracts (and suppliers)?

• How will performance be measured?• How many are too many suppliers?

– Too many suppliers cost money– Supplier integration– Collaborative agreements– Supplier development– Without material production shuts down

• What is the risk?



13

Contract Management

• Supplier performance metrics– On-time delivery– Material and/or service quality– Returned materials– Expedite issues– Pricing analysis

• Problem resolution procedures– Improve or else– Continuous improvement process

• When to end the contract



14

Creating a Contract

• Is a long-term agreement with a vendor to provide a material or service– For an agreed upon period of time– At a negotiated price or quantity

• Can be created manually or with reference to purchase requisition, Request for Quote (RFQ)/quotation etc.



15

Two Types of Contracts

• Quantity contracts are agreements with a particular vendor to purchase a specific quantity of materials. Example: Target quantity of 50,000 meters of electrical wire at $2/meter. (MK)

• Value contracts are similar to quantity contract except the agreement is to purchase an established monetary value of materials. Example: Target value of $100,000 for electrical wire. (WK)



16

Quotations/Contracts Process

• Requirement for material is identified• Process followed to select a vendor– Request for Quotation (RFQ)– Maintaining a Quotation– Comparison of Prices– Creating a Contract – Creating a Release Order



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Request for Quotation (RFQ)

• Is an invitation to a vendor to indicate their terms and conditions (in particular, their price) for the supply of a material or the provision of a service by submitting a quotation

• Identifies the required material, quantity, and delivery dates



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Quotation

• A quotation contains the vendor's pricing and conditions for providing the material or service stated in the Request for Quotation (RFQ)

• In the SAP component Materials Management (MM) Purchasing, the RFQ and quotation are the same document. You enter the vendor's pricing and conditions in the original RFQ.



19

Maintaining a Quotation

• Enter each vendor's quotation in the associated Request for Quotation (RFQ)

• Compare prices using the price comparison list• Store the best quote in an info record• Optionally, send rejection letters to the losing

bidders



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Comparison of Prices

• You can compare the prices from all quotations from the competitive bidding process using the price comparison list

• The comparison list ranks the quotations by item from lowest to highest price



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Creating a Release Order

• Purchase order that references a contract is called a release orders, they specify:– Number of the contract– Quantity to be released– Delivery date

• Release order documentation (open quantity, quantity released to date, total value) is automatically updated against the contract when a release order is created



22

Creating a Release Order (continued)

• The vendor data, price data, and the delivery terms and conditions are copied directly to the release order

• Release orders can be created from a proposed purchase requisition generated off an Materials Requirement Planning (MRP) run (net requirements)– Manually– Automatically



23

Unit 13 – Exercises

107. Create Purchase Outline Agreement (Contract) for Stock Items

108. Run Materials Requirements Planning – Single Item, Single Level

109. Convert Proposed Purchase Requisition to Release Order

110. Review Outline Agreements 111. Create Goods Receipt112. Create Invoice Receipt from Vendor113. Post Payment to Vendor

meljun cortes materials management transactions part 2

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