sap mm process flow

SAP MM (Materials Management)

• SAP MM (Materials Management) is a module of the SAP Enterprise Resource Planning (ERP) package that is used for Procurement Handling and Inventory Management.

• The module has two important master data – material and vendor.

• Broadly, the various levels that can be defined for a SAP MM implementation are: Client, Company Code, Plant, Storage Location and Purchase Organization.

• This is the largest and most complex in all of SAP modules. It can be divided into five major components. There are: materials management, plant maintenance, quality management, production planning and control, and a project management system. Each is divided into number of subcomponents.

• SAP Materials management covers all tasks within the supply chain, including consumption-based planning, planning, vendor evaluation and invoice verification.

• It also includes inventory and warehouse management to manage stock until usage dictates the cycle should begin again. Electronic Kanban/Just-in-Time delivery is supported.

• Material Management covers the functionality required to purchase goods and services, manage inventory, and inspect incoming materials.

• The Purchasing function includes creation of requisitions, requisition approval, purchase order generation, and receipt of goods and services.

• Inventory Management includes issuing and transferring inventory, inventory restocking, and the inventory count and adjustment processes.

The basic of the purchase to pay flow is explained below.

• Determination of Requirements

In this step, there is a requirement of material or service, which must be procured externally, from the user. The requirement must be recorded as Purchase Requisition (PR) document in SAP MM.

Purchase Requisition (PR) isan internal purchasing document in SAP ERP that is used to give notification to responsible department about the requirement of material/service and to keep track of such requirement.

• Determination of the Source of supply

After the PR has been created in the previous step, the responsible department must process it. The buyer of the procurement department must determine the possible sources of supply of the material/service specified in the PR.

• Vendor Selection

If in the previous step, there are some outline agreements or info record documents that can be used as references to create a PO, the buyer can select or choose which vendor that will be appointed to provide the material/service at this time.

• PO Processing

In the previous step, the buyer has selected the vendor which will provide the material/service needed in PR. In this step, the buyer creates a Purchase Order (PO) based on the PR and the reference document (that can be an outline agreement, an info record, or a quotation).

• PO Monitoring

After the PO has been sent to the vendor, the buyer has the responsibility to monitor whether the vendor delivers the material/service at the right time on the right place.

• Goods Receipt

When the vendor delivers the material or perform the service, the responsible person of the company must perform the goods receipt (GR) or service acceptance (SA) transaction. The GR/SA will update the PO history.

• Invoice Verification

After the vendor delivered the material/service, it will send the invoice to the person responsible in the company. Invoice is a formal document issued by a vendor to the company to request the payment for the material or service that the vendor has already provide to the company according to the terms of payment agreed in the PO.

• Payment Processing

After the Invoice Receipt (IR) transaction has been posted, the vendor’s account payable will increase and the company must process the payment to that vendor as stated in the terms of payment of the PO. The payment transaction will be performed in FI module. After the payment has been posted, the vendor’s account payable will be debited and the cash or bank account will be credited.

SAP MM stands for Materials Management and this is part of SAP Logistics includes:

• Requisitions

• Purchase orders

• Goods receipts

• Accounts payable

• Inventory management

• BOM’s

• Master raw materials, finished goods etc

Some of the Main SAP MM Transactions are:

• ME51N – Create Requisition

• ME21N – Create Purchase Order

• MIGO – Goods receipt a PO

• MIRO – Create Invoice

One of the main areas covered by MM module is Purchasing/Procurement. The purchasing process is initially started when there is a requirement of material/service from a user. If the material/service can not be obtained from company’s internal resource, the responsible person of that company must find the vendor/supplier which can provide it on the required date. The purchasing process is ended when the payment processing to the vendor that supply the material/service has been done.