By Ashley Chimhanda

OVERVIEW

Materials management is the backbone of Logistics area and helps to manage the procurement and inventory management activities of an organization

To GETThe Right quality

Right quantity of suppliesAt the Right timeAt the Right placeAt the Right cost

5R

FEATUR

ESAIM

Ensures that there is never a shortage of materials or any gaps in the supply chain process of the organization

It deals with managing the materials (products and or services) resources of an organization

It deals with the Procurement Process, Master Data, Account Determination & Valuation of Material, Inventory Management, Invoice Verification, Material Requirement Planning

PurchasingExternal procurement of materials and servicesAnd Determination of possible sources of supply for a requirement identified by the materials planning and control system or arising directly within a user department

Contractsa type of outline purchase agreement against which release orders can be issued for agreed materials or services as and when required during a certain overall time-frame

Inventory managementIt deals with Management of material stocks on a quantity and value basis

Material masterIt contains data records which are stored centrally and used on a cross application basis.

Logistic invoice verificationIt is situated at the end of the logistics supply chain and this is when the system invoice is matched with the goods delivered.

MRPIs used to monitor stock and make automatic requisitions when stocks fall below specified quantities

ORGANIZATIONAL

STRUCTURE

The organizational structure forms a framework of a company in which business is conducted.

Client:Represents a grouping or combination of legal, organizational, business and/or administrative units with a common purpose.

Storage Location:A place where inventories are physically kept in a plant and is the least level of an organization in MM.

Plant:Operational unit within a company code.

Company Code:Company Code represents an independent accounting unit within a client. Eachcompany code has its own balance sheet and its own profit and loss statement.

MASTER DATA

This is a collection of data about an object or person which is referenced whenever it is used in an entry field.

Types of Master Data:-Material Master: Is the main source of material specific data in an enterprise. Vendor Master: Contains all required information on a vendor and is maintained by FI & Purchasing dept. Service Master: Contains the description of a service and serves as a source of data for you to draw upon when creating service specifications

Materials management

Determine requirements

Source determination

Vendor selection

Order processing

Order-follow up

goods receipt and inventory management

Invoice verification

PROCUREMENT

CYCLE

PURCHASING

Purchasing refers to a business or organization attempting to acquire goods or services to accomplish the goals of its enterprise.

Task of Purchasing as following :- External procurement of material & services Determination of possible source of supply Monitoring deliveries from and payment to vendors.

PURCHASING

DOCUMENTSPurchase requisition

Request for quotation

Purchase order

Contract

Quotation

31. 1.

Contract

Purchase order

?Quotation

B

Quotation

A

RFQ

?

Purchasingrequisition

INVENTORY

MANAGEMENT

Inventory Management is used to manage stocks of merchandise on a quantity and value basis.

Task of Inventory Management as include :-Plan, enter and provide evidence of all goods movements.Creation of a document for every goods movement Division of the stock into categories (such as unrestricted-use stock, stock in quality inspection, or blocked stock)

PROCESSES WITHIN

‘INVENTORY’

Goods ReceiptReturn delivery

Stores Req.

Goods issue

Material disposalStock Transfers

Reporting

MRP

MRP: It’s main function is to guarantee material availability, i.e. it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution.

MRP involves:- the monitoring of stocks the automatic creation of procurement proposals for purchasingMonitoring deliveries from and payment to vendors.

PROCESS FLOW

• A Approve/Change PR

• Generate PO/Approve

• Execute MRP

• Goods Receipt

Stores MRP Controller

Section Head

Buyer/

Procurement manager

CONTRACTSIn MM, a contract is a type of outline purchase agreement against which release orders (releases) can be issued for agreed materials or services as and when required during a certain overall time-frame.

Contracts can be :- Centrally Agreed: For an entire company code. Distributed: For one particular plant

TY TYPES OF CONTRACTS

INTEGRATION

How the SAP MM module integrates with some other SAP modules

Integration with PP

Creation of PR for externally procured materials after doing an MRP run in PP.

Creation of PR for subcontracting for externally processed operations in a production order(PO).

Creation of Reservations for components of a PO during PO creation. Goods Issue of components as soon as components are confirmed for a PO

& a Goods receipt of the finished product.

Integration with FI

When a PR for a non stock item is created, the system goes on to update the correct cost center in FI.

After a stores req, the system assigns the cost to the relevant cost centreand updates the relevant accounts(giver & given).

When a material document is created, postings are done to the relevant accounts and for every mat doc there is a corresponding FI doc.

In general any transaction with a monetary value is catered for in FI.

Integration with SD

Third party sales order processing. When you create a delivery for SD sales order then goods issue takes place

in the background using movement type 601.

Integration with PM

In the event of a maintenance(breakdown/preventative), a maintenance order is created where there’ll be a GI(MM).

By Ashley Chimhanda