MM OVERVIEW

Prepared by: Meenakshi Srinivasan

Materials Management (MM) is a very vital part of Supply Chain management (SCM) and is the central pivot of operation logistics as a whole because it has the essential functions which are in practice and accessed within the complete logistics chain.

The SCM solution is to support businesses Planning, Controlling and Optimizing their Supply Chains

The main goals of Supply Chain Management include the reduction of costs for procuring finished products and raw materials, the improve the customer service, dramatic reduction of warehouse stocks and the use of all resources to bring substantial advantages to the company.

The main links of supply chain are customers, purchasing, production, sales and distribution.

INTRODUCTION

Expected Benefits from MM module

Stock Reduction Reduced Purchasing costs per item

Improved service levels of material to the appropriate operation

Reduced costs of reporting

Reduced clerical cost and the elimination of duplication

Reduced headcount

Reduction of movement costs

Reduced costs of running old systems and associated hardware and software maintenance costs

Increased visibility.

Important Elements of MM module

Purchasing: Procurement of materials

Service: Finalizing service specifications, awarding contracts and service entry.

Inventory management or stocktaking

Invoice Verification and material evaluation

Warehouse Management

Consumption driven material Resource Planning

Vendor Evaluation

Organizational Levels:

Client:

Company Code:

Plant

Storage location

Purchasing Organization/ Purchasing Group

In SAP R/3, The organizational levels replicate the legal and organizational structure of an enterprise.

Basics of Procurement Process

Client: Client is a unit within R/3 which is self contained both in terms of legal and organizational terms. It is the highest hierarchical level in the SAP R/3 system. It is uniquely defined by a 3 digit numeric key.

Company Code : It is the smallest organizational unit of external accounting for which a complete self contained book keeping system can be replicated. It represents an independent unit producing its own balance sheet. It is represented by a 4 character alphanumeric code and is unique within the client.

Plant: A plant is an organizational unit within logistics that subdivides an enterprise from the viewpoints of production , procurement, & materials planning. A plant may be a production facility, distribution center, regional sales office, corporate headquarters, maintenance location. Plant is represented by a 4 digit alphanumeric code and is unique within the client

Storage location: A storage location is a an organizational unit that facilitates the differentiation of stocks within a plant. Inventory management on quantity basis is carried out in the plant at storage location level. It is defined by means of a four character alphanumeric key that is unique in the plant.

Basics of Procurement Process

Basics of Procurement ProcessPurchasing Group: It s a key for buyer or group of buyers who is/are responsible for certain purchasing activities. Purchasing groups are not assigned to other units of enterprise structure in SAP R/3.

Purchasing Organization is an organizational unit within logistics that subdivides the enterprise according to the purchasing requirements. A purchasing organization procures materials or services, negotiates conditions of purchase with vendors ad assumes responsibility for these actions.

Pr

Procurement Cycle

Types of procurement

Procurement of Stock Material

Procurement of Consumable material

Procurement of External Services

Automated Procurement

Material Requirements Planning

Contract and Source Determination

Automatic Generation of POs

Goods ReceiptGoods Receipt is the second step of material procurement process. It is replicated in R/3 by means of a document. Receipt of goods from both external vendor and from production is posted.

Goods Receipt helps to check whether the right material has been delivered ,right quantity has been delivered, whether there is an over or under delivery and if perishable goods are within their minimum shelf life.When a goods receipt is posted, the system generates a material document which has information on the material delivered and the quantity.If the goods receipt is valuated, an accounting document is generated in addition containing the accounting effects of the material movement.

Goods Receipt (contd)When entering a goods receipt in R/3 you must specify a movement type.

Movement type assumes important control functions in inventory management and plays central role in automatic account determination.

Together with other influencing factors, movement type determines which stock or consumption accounts are updated in financial accounting.

Movement type also determines the layout of the screen for document entry.

Goods Issue Goods Issue is a movement in which a material withdrawal, goods issue, material consumption or shipment is posted.

Stock Transfer is removal of materials from one storage location to another storage location. Stock transfer can take place both within the same plant or between two plants. It is always associated with a physical movement.

Transfer Posting is a type of stock transfer where the stock identification or qualification of the material changes regardless of whether the posting is associated with a physical movement or not.

Invoice VerificationInvoice Verification is yet another crucial step which finally completes the whole accounting process.

Invoice is the vital document which is the recording for the money owed to supplier for the supply of goods or services.

In SAP, invoice verification can be done based on the physical invoice from supplier or system can generate invoice based on goods receipt.The second type is called evaluated receipt settlement process.

Other Topics Physical Inventory

Types of Stock

Reporting & Analysis

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