SAP LOGISTICS I SAP MM | Procure To Pay Cycle

SAP (System Application and Products in Data Processing) ERP has many modules.

SAP Logistics is one of them. Logistics are incorporates following modules: 

• Sales and Distribution, 
• Production Planning, 
• Plant Maintenance, 
• Project Systems, 
• Warehouse Management 
• Materials Management module.
• SAP MM deals with the material management and inventory management
• MM process ensures that there is never a shortage of materials,
• SAP MM speeds up the procurement and material management activities making the run business smoother with complete time and cost efficiency.
• the aim is to accelerating the productivity.
•  Reducing cost
• Deals with procurement process, master data (Material and vendor) , account determination and valuation of material, Inventory

Procurement Cycle :

A brief introduction of Procurement activities is given below:

Procurement Activities	Description
Determination of requirement	It is the logical subdivision where it is determined that what material or services are required to company, and which supplier can fulfill the requirement.
Creating Purchase Requisition	It is the phase in which purchasing department is informed about the requirement of items or services required for business purpose. A requisition is a internal document.
Creating Purchase Order	It is the phase when order is created from requisition and it is approved and assigned to a supplier.
Goods receipt/ Invoice Received	It is the phase in which the material is received by the company and the condition and quality are verified. In this phase Invoice is received from the vendor (seller).
Invoice verification/ Vendor Payment	It is the phase in which the vendor (seller) is paid from the company and reconciliation of the invoice and PO is accomplished.

Procurement for Stock vs Consumption

The following points show the difference of Procurement for Stock vs. Consumption:

• Procurement for Stock - A stock material is a material that is kept in stock. These materials are kept in stock once received from the vendor. The stock of this material keeps on increasing or decreasing based on amount of the quantity received or issued. To order a material for stock, the material must have a master record within the system.
• Procurement for Direct Consumption - When procurement is for direct consumption i.e. it will be consumed as soon as it is received, the user should specify the consumption purpose. To order a material for consumption, the material may have a master record within the system.

Special Procurement : 

Consignment Stocks

Material that is available at our store premises, however it still belongs to the vendor (seller)/Owner of the material. If you utilize the material from consignment stocks, then you have to pay to the vendor.

Third-party processing

In third-party processing, a company passes on a sales order to associate external vendor (seller) who sends the goods directly to the customer. The sales order is not processed by your company, however by the vendor (seller). Third-party items can be entered in purchase requisitions, purchase orders and sales orders.

Pipeline handling

In pipeline handling, the company needs not to order or store the material involved. It is obtainable as and when required via a pipeline (for example, oil or water), or another style of cable (such as electricity). The material that is consumed is settled with the vendor (seller) on a regular basis.

Returnable Transport Stock

The company orders goods from a vendor (seller). The goods are delivered with returnable transport packaging (pallets, containers) that belongs to the vendor (seller) and is stored on the customer premises until they return it to the company.

Subcontracting

The vendor (the subcontractor) receives components from the ordering party with the help of which it produces a product. The product is ordered by your company through a purchase order. The components required by the vendor (seller) to manufacture the ordered product are listed in the purchase order and provided to the subcontractor.

Stock transfer using stock transport order

Goods are procured and supplied within a company. One plant order the goods internally from another plant (receiving plant/issuing plant). The goods are procured with a special type of purchase order - the stock transport order. You'll be able to request and monitor the transfer of goods with a stock transport order.

The Organizational Structure in MM consists of following Organizational Levels:

• Client - Client is a commercial organizational unit in R/3 system.
• Company Code (OX15 OX02)- Independent accounting unit. 
• Plant (OX10) - Independent unit where activities take place. A plant produce goods and makes goods available for the company. that has own profit, loss and balance statement.
• Storage Location(OX09) - differentiates between different material stocks in a plant. where stock is kept physically.
• Purchasing Organization (OX08) - Purch Org is an org unit under company or plant which is responsible for procurement activities according to requirements. can be company specific or plant specific. 
• Purchasing Group(OME4) - responsible for everyday procurement activities within an organisation.

Four basic and must assignments in standard SAP are:

• Plant to Company code - OX18
• Purchasing organization to company code - OX01
• Purchasing organization to Plant - OX17
• Standard purchasing organization to plant - SPRO

                   
SAP MM Master Data :

• Material Master Data -
•  Has for characteristics :
1. Materials Types (OSM2) : Materials with some common properties are grouped  together and they are assigned to a material group. (Raw Material, Finished products)
2. Material Groups (OMSF) : Material group is a wider range of material type. Materials with some common attributes are taken together and they are assigned to material group. For Example: Suppose we have some materials which need packaging, so there material type can be electrical or food products but we can group these material types and put them in packaged material group. 
3. Number Range (MMNR): external (you assign manually) Internal (system assign automatically). Number Ranges are defined for each material type.
4. Material Master Creation (MM01): 
• Vendor Master Data - this data will include information on vendors from which a company can procure or it can sell. Information like vendor name and address. data is divided in three categories :
1. General Data : maintained at client level valid for all org levels
2. Accounting Data : maintained at company level 
3. Purchasing Data : maintained at purchasing org level. 
• Vendor master has 3 characteristics :
1.  Vendor Account Group (OBD3)
2.  Number Range (XDN1)
3. Creation of Vendor Master (XK01)

Procure to Pay Cycle 
The steps which are required to procure a material in right quantity and at the right price, forms the Procure to Pay Cycle.

1. Determination of the requirement : What material or service is required by the company and which supplier can provide this.
2. Purchase Requisition ( ME51N) : Internal request to purchasing. PR converted to RFQ/PO/routine agreement. 
3. RFQ (ME41): Either can be created manually or automatically from PR. 
4. Purchase Order (ME21N) : Is a formal and final confirmation of the requirement which is sent to the Vendor to supply material or services. Delivery date, quantity,price, reference etc. TYpes of POs in MM are :
• Standard PO
• Subcontracting PO - Item Category L
• Consignment PO - Item Category K
• Stock Transfer PO - Item Category U
• Service PO - Item Category D 
• Planned PO
• Contract PO
5. Posting Goods Receipt (MIGO) : After Processing of PO by Vendor , goods are delivered to the ordering party and his process in called goods receipt. So, goods receipt is a process in which goods are received by the ordering party and the condition and quality are verified. Following are the steps for posting goods receipt :
1. GO to MIGO.
2. Fill all the necessary details like movement type (101 for goods receipt), name of the material, quantity received , details of storage location and plant where material going to be stored.
3. Save .
6. Posting Invoice (MIRO): This is the phase where the Vendor is paid from the company and reconciliation of the invoice and PO is accomplished. Below are the steps for posting invoice :
1. goto MIRO.
2. Fill necessary details like invoice posting date, amount that is paid to vendor along with quantity.
3. Click on save.

Inventory Management : It deals with following terms :

1. Movement Type - Describes he type of stock posting in inventory.  It represents the posting in stock is due to which type of order, like if stock is posted against goods receipt or goods issue.The Important movement types are :
1. 101 - Goods Receipt for PO 
2. 103 - GR for PO in GR blocked stock 
3. 201 - Goods Issue for a cost center 
4. 261 - Goods issue for an order
5. 301 - transfer posting plant to plant in one step 
6. 305 - transfer posting plant to plant in two steps - placement in storage 
7. 311 - transfer posting to storage location to storage location in one step
8. 313 - Stock transfer storage locations to storage location in two steps - removal from storage
9. One step transfers of materials can be posted using movement type 301. Other movement types are 303, 351, 641, or 643 in the stock transport order.
2. Goods Receipt MIGO - When order is received by ordering party. and condition and quality are verified. 
3. Reservation (MB21/MMBE) - Sometimes stock need to be blocked in advance so it can be available for a particular point of time. this is known as reservation.
4. Goods Issue MIGO -  moving stock out of inventory , this will result in decrease in quantity in warehouse.

Invoice Verification MIRO:

Blocked Invoice - To release blocked invoice use MRBR.

T-Code	Description
OX15	Create Company
OX02	Create Company Code
OX10	Create Plant
OX09	Create Storage Location
OX08	Create Purchasing Organization
OME4	Create Purchasing Group
OX18	Assign Plant to Company Code
OX01	Assign Purchasing Organization to Company Code
OX17	Assign Purchasing Organization to Plant
MM01	Create Material
MM02	Change Material
MM03	Display Material
MB51	Material Document List
MMDE	Delete All Materials
MMNR	Define Material Master Number Ranges
XK01	Create Vendor
XK02	Change Vendor
XK03	Display Vendor
ML33	Create Vendor Conditions
ME11	Maintain Purchasing Info Record
ME01	Maintain Source List
ME51N	Create Purchase Requisition
ME52N	Change Purchase Requisition
ME53N	Display Purchase Requisition
ME41	Create RFQ/Quotation
ME42	Change RFQ/Quotation
ME43	Display RFQ/Quotation
ME31L	Create Scheduling Agreement
ME32L	Change Scheduling Agreement
ME33L	Display Scheduling Agreement
MEQ1	Create Quota Arrangement
MEQ2	Change Quota Arrangement
MEQ3	Display Quota Arrangement
ME21N	Create Purchase Order
ME22N	Change Purchase Order
ME23N	Display Purchase Order
ME29N	Release Purchase Order
ME59N	Automatic generation of Purchase Order
MIGO	Post Goods Movement
MB1A	Goods Withdrawal
MB1B	Transfer Posting
MB1C	Post Other Goods Receipts
MB01	Post Goods Receipt for Purchase Order
OMJJ	Customizing: Define New Movement Types
MIRO	Enter Incoming Invoice
MIRA	Fast Invoice Entry
MR8M	Cancel Invoice Document
MRBR	Release Blocked Invoices
OMR6	Tolerance limits: Invoice Verification
MIR5	Display List of Invoice Documents
MIR6	Invoice Overview
MIR7	Park Invoice
MRIS	Settle Invoicing Plan
AC02	Service Master
ML81N	Create Service Entry Sheet
MRRL	Evaluated Receipt Settlement
MMB1	Create Semi Finished Product
MMF1	Create Finished Product
MMG1	Create Returnable Packaging
MMH1	Create Trading Goods
MMI1	Create Operating Supplies
MMK1	Create Configurable Material
MMN1	Create Non-Stock Material
MMBE	Stock Overview
MB52	List of Warehouse Stocks on Hand
MB21	Create Reservation
MBST	Cancel Material Document
MB5T	Stock in Transit

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