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MM - Overview
MM - Purchasing
MM - Purchase Order
MM - Inventory Management
MM - Invoice Verification


Course Objectives
On conclusion of this course, you should be
able to:
Visualize the MM functionalities
Understand MM related views of Material

Master and Vendor master records

Create other master records or changing

the existing master records



MM overview
Organizational Structure
Material master
Vendor master
Other master records

MM - Overview
Major components of MM- Module

materials planning and control (MRP)


inventory management

invoice verification.

Integration with other Modules

Logistics Planning
Sales Logistics
Finance / Asset Management

Integrated Business Process Overview










MM Organization Structure


Company code 1

Plant 1

Storage WH
location 11

Company code 2

Plant 2

Storage WH
location 2


Plant 3

Plant 4

Organizational Elements - Client

Client Characteristics
Highest Hierarchical Level in SAP(e.g. a corporation)
Can be Used to Differentiate between a Development,
Quality Assurance, and Production System within R/3
All Areas of an Organization that are to be Integrated
into the SAP R/3 Production System should be Included
Under one Client

Organizational Elements - MM

Purchasing Organization
Responsible for Procurement for One or More
Responsible for Negotiating Pricing and Delivery
Terms with Vendors
Purchasing Organization is Assigned to A
Company where Inventory is Legally Tracked or
Costs are Legally Incurred.

Organizational Elements - MM


Usually a Manufacturing Facility, Warehouse, or a

Location that Stocks , Manages, and Valuates
May be a Physical Site with Multiple
Manufacturing/Production Lines
May be Multiple Manufacturing/Production Lines at
One Physical Site
Can be a Physical Location(cost centers may or
may not be associated to a plant i.e. administrative
Vs. manufacturing cost centers)
SD Availability Checking is Normally Done at the
Plant Level

Organizational Elements - MM

Plant (Cont.)
Links to Production (PP), Materials Management
(MM), and Sales and Distribution (SD)
A Plant is Assigned to A Company code
Purchasing Organization are Assigned to Plants

Organizational Elements - MM

Storage Location
A Location within a Plant where Inventory is

Master data in MM
Material Master
Vendor Master
Service Master
Purchasing info record
Source List

Material master in SAP.

The material master contains information on all the
materials that a company procures, produces, stores,
and sells.
The material master is used by all components in the
SAP Logistics System
Different departments in a company work with the
same material, so data in a material master record is
subdivided in the form of user departments.
Material description and Base unit of measure appear
in all user departments.

Use of material master in SAP logistics system

In Purchasing for ordering materials.
In Inventory Management for goods movement
postings and physical inventory
In Invoice Verification for posting invoices
In FI for maintaining value of material.
In Production Planning and Control for material
requirements planning, scheduling, and work

User departments using same material master

Material Numbers

Number uniquely identifying a material master record,

and thus a material.


For every material that your company uses, you must

create a material master record in the material master.
This record is uniquely identified by a material number.

Internal and External number assignment.

Industry sector
It determines type of industry .

Eg. mechanical industry,chemical

industry,pharmaceutical etc.

The industry sector you specify determines

Which screens appear and in what sequence

Which industry-specific fields appear on the individual


Material Types
Materials with the same basic attributes are grouped together
and assigned to a material type.
When creating a material master record, you must assign the
material to a material type. The material type determines certain
attributes of the material and has important control functions.
Some of the standard material types are

ROH: Raw materials which are bought from outside and goes into

HALB :Semi-finished material which are bought externally and

manufactured inside. They can be sold individually as well.

FERT:Finished materials are final products of the company

Views relevant to MM

Basic data1/data2
Purchase order text
Storage 1
Storage 2


From logistics screen click

Logistics Materials Management material master, to bring up

material master screen.
Click material create(general) immediately

Organizational levels.


Storage location

Material master
In Purchasing screen you can enter

Purchasing group

purchasing value key

Set indicator for automatic PO

Material master
In purchase order text screen,

you can enter the text , which will be defaulted in PO

every time when you create a PO for this material.

In Storage 1 you can enter,

Storage bin

Unit of issue

Shelf life data

Batch management

Concept of vendor master in SAP.

vendor master record is maintained by both Accounting and
A vendor can be a one time vendor or regular vendor
A vendor master record contains the vendors name and
address, as well as data such as:

the currency used for ordering from the vendor

terms of payment

names of important contact persons (sales staff)

Organization of vendor master records

A vendor master record is subdivided into three
different data areas:

General Data

Company code data

Purchasing organization data

Creating vendor master record.

Menu Path

Logistics -> Material management -> purchasing ->master

data vendor ->purchasing ->create

In the initial screen you can enter,

Vendor number (For External number assignment )

Vendor account group

Purchasing organization

Creating vendor master record.

In general data you can maintain,



Payment transactions

In Purchasing organization data you can maintain,

Purchasing Data

Partner functions

Changing vendor master record

You cannot change Vendor account group (One time
vendor cannot be converted in to a regular vendor)
Blocking a vendor
Flag for deletion
Changing other options

Automatic PO

Vendor schema group

Payment terms


Service Master Records

Descriptions of all services that may need to be
procured can be stored.
The organizational level at which services are procured
is the purchasing organization.
In addition to a unique description of the service, a
service master record contains further information that
is necessary for procurement purposes (such as texts
or units of measure).

Creating a service master record

In the initial screen you can enter

Service number (if external number assignment)

Service category

In the Basic data screen enter,

Base unit of measure

Description of services

Valuation class (3200 for services)

In the classification screen enter,

The class for classifying the services

Concept of Purchasing info rec in SAP.

An info record represents a material-vendor
The info record contains concise information about a
vendor and a material that you already procure from
that vendor.
Info records are created automatically when you order
a material. You can also create, change, and delete info

Purchasing info rec (Contd)

Use of Purchasing info rec in PO creation

Net price for the item will be defaulted in PO

All the pricing conditions will be defaulted

other uses include

Delivery tolerance
Shelf life
Purchase order text

Purchasing info rec (Contd)

Use of info rec in Vendor evaluation

Order price history

Quotation price history

Delivery reliability

Quantity reliability

Concept of source list in SAP

A source list specifies the possible sources of supply for a
material over a given period of time
It shows the time period in which a material may be
ordered from a given vendor
Source list can be created automatically using generate
source list option
Source list can also be maintained manually.

Source List (Contd)

Uses of source list

Fixed vendor

Vendor blocking

Auto PO creation

Source list requirement at plant level

Can be made mandatory

MM - Purchasing

Course Objectives
On conclusion of this course you should
be able to
Understand the concepts in SAP -

Purchasing component
Create or change PRs
Create, change or compare RFQs
Create contracts



Purchasing overview
Purchase requisitions
Request for quotations
Outline agreements


Purchasing - overview
The Purchasing component has the following tasks:

external procurement of materials and services

determination of possible sources of supply for a requirement

identified by the materials planning and control system

determination of possible sources of supply for a requirement arising

directly within a user department

monitoring of deliveries and payments to vendors

Purchasing - integration with other modules


Controlling (CO)

Purchase orders for materials intended for direct consumption

They can be directly assigned to a cost center or a production

Financial Accounting (FI)

Vendor master is maintained by both accounting and purchasing


Through PO account assignment, Purchasing can also specify

which G/L accounts are to be charged in the financial accounting

Purchasing - integration with other modules

Sales and Distribution (SD)

Within the framework of materials planning and control, a

requirement that has arisen in the Sales area can be passed on
to Purchasing.

When a requisition is created, it can be directly assigned to a

sales order.

Process flow in purchasing

Determination of Requirements

Materials requirements are identified either in the user departments

or via materials planning and control.

It includes both MRP proper and the demand-based approach to

inventory control.

The regular checking of stock levels of materials defined by master

records, use of the order-point method, and forecasting on the basis
of past usage are important aspects of the demand management.

You can enter purchase requisitions yourself, or they can be

generated automatically by the materials planning and control

Process flow in purchasing

Source Determination

The Purchasing component helps in identifying potential sources of

supply based on past orders and existing longer-term purchase

This speeds the process of creating requests for quotation (RFQs)

Vendor Selection and Comparison of Quotations

The system is capable of simulating pricing scenarios, allowing you

to compare a number of different quotations.

Rejection letters can be sent automatically.

Process flow in purchasing

Purchase Order Processing

The Purchasing system adopts information from the requisition and the
quotation to help you create a purchase order.

You can generate Pos yourself or have the system generate them

Vendor scheduling agreements and contracts are also supported.

Purchase Order Follow-Up

The system checks the reminder periods you have specified

System automatically prints reminders or expediters at the predefined intervals.

It provides you with an up-to-date status of all purchase requisitions,

quotations, and purchase orders.

Process flow in purchasing

Goods Receiving and Inventory Management

Goods Receiving personnel can confirm the receipt of goods simply

by entering the Po number.

By specifying permissible tolerances, buyers can limit over- and

underdeliveries of ordered goods.

Invoice Verification

The system supports the checking and matching of invoices.

Invoice verification can be based on purchase orders or GR
documents or directly to a vendor without any document

Std. Menu options in Purchasing


Use this option to create a purchasing document .

Enter the required information and save the document .

The document is then stored under a unique number.


Use this option to change a purchasing document .

You need the document number in order to access the document.

Std. Menu options in Purchasing


Use this option to display a purchasing document .

You cannot change or add any information to the document that is

displayed .

You need the document number in order to access the document.

List displays/reporting

You can use these options to generate reports analyzing purchasing



List of all purchase orders for Vendor ABC

Std. Menu options in Purchasing

Follow-on functions

This option allows you to perform tasks related to (following on from)

but not included in the purchasing functionality.


Entering a goods receipt or an invoice in the system.


This option enables you to print or transmit documents in message



Transmission via fax, Printouts etc

Purchasing Documents

A purchasing document is an instrument used by Purchasing to

procure materials or services.

Types of purchasing documents

Request for quotation (RFQ)

Transmits a requirement defined in a requisition for a material or

service to potential vendors .


Contains a vendor's prices and conditions

It is the basis for vendor selection.

Purchasing Documents

Purchase order (PO)

The buying entitys request or instruction to a vendor (external

supplier) to supply certain materials or render/perform certain

It formalises a purchase transaction .


In the SAP Purchasing component, a type of "outline agreement", or

longer-term buying arrangement .

The contract is a binding commitment to procure a certain material or

service from a vendor over a certain period of time.

Purchasing documents

Each purchasing document is subdivided into two main areas:

The header

The header contains information relevant to the whole document .

Example, information about the vendor and the document number is

contained in the document header

The individual items .

The items specify the materials or services to be procured .

Example, The material description and the order quantity are

specified in each item.

Purchasing documents

The additional data

It provides extra information about the item, and has no direct

connection with the item procurement data.


account assignment data

PO history for an item, which contains information on already

recorded goods and invoice receipts relating to the item.

Classification of Purchasing Documents

Purchasing documents are differentiated in the SAP system via the

document type .

Example, relevant number range depends on document types

Purchasing documents

Document types are defined for RFQs, purchase orders, and contracts

Numbering of purchasing documents

Each document is assigned a unique number .

This number can be assigned internally or externally , depending on

the policy .

Internal number assignment means that the system assigns the


External number assignment means that the person creating the

document must supply it.

Alphanumeric assignment is only possible in the latter case.

Purchase requisitions

A purchase requisition is a request or instruction to Purchasing to procure a

certain quantity of a material so that it is available at a certain point in time.

It is an internal document.

Requisitions can be created in the following ways:

Directly: Someone from the requesting department enters a purchase

requisition manually.

Indirectly: The purchase requisition is created via another SAP component.

Purchase requisitions can be subject to a release procedure.

Purchase requisitions - integration

Requisitions can be created indirectly in the following

via materials planning and control

The component Consumption-Based Planning suggests

materials that need to be ordered on the basis of past
consumption or usage figures and existing stock levels.

The order quantity and the delivery date are determined


Materials planning and control can stipulate that a purchase

requisition is to be resubmitted to the purchasing department if it
has not been processed after a predefined period of time.

Purchase requisitions - integration

Requisitions are generated automatically from
production orders if

They contain an external processing operation (e.g. subcontracting


A precondition is that the control key for the operation allows or

prescribes external processing.

they contain non-stock components

Purchase requisitions
Procurement types



Components to be provided can be entered.


Stock transfer

External service

Service specifications can be entered

Manual creation of PR
Things to remember

Item category

Account assignment category

Purchasing organization

Purchasing group

Requirement tracking number

Delivery date

Item with or with out material master record

Order quantity

Creating Request For Quotation

Automatically from PR

With reference to PR

With out reference to PR

Delivery address

Address of the company asking for quotation, by default it is the address of E+L.
But it can be changed.

vendor address

Just enter the codes of the vendor, System will take other details from vendor

Quotation dead line

Delivery date

RFQ (contd)
Printing RFQ
Send the Printed RFQ to the vendors
Receive the quotation from the vendor
Maintain the RFQ

Enter the net price quoted by the vendor

Enter the pricing conditions

Terms of payment

Update the info record if reqd

Compare the quotations

Maintain the collective number in the RFQs

Quotations can be compared based on price

Discounts and delivery costs can be included

Comparison can be based on effective price also

System compares and gives the ranking list

Percentage basis for comparing quotations

Mean value equals 100%

Maximum value equals 100%

Minimum value equals 100%

Outline agreements with the vendor

To Setup longer-term purchasing arrangements with
vendors regarding the supply of materials or the
performance of services.

Outline agreements can be subject to a release (approval or

clearance) procedure.

Agreement types

Quantity contract

Value contract

Outline agreements

Document header: containing information relating to the entire

agreement. For example, the vendor information and header
conditions are in the document header

Items: containing the information specific to the relevant material or


statistics on ordering activities for the item

quantity or price of the item

conditions, such as quantity discounts and surcharges

Outline agreements
Texts in Outline Agreements

Header texts

Item texts

You can create your own text types

Creating a outline agreement

Outline agreement can be created with reference to a RFQ or without any


Important terms

Purchasing organization
Purchase group

Outline agreements
Target quantity
Target Value
Pricing conditions
Validity starting and ending date
Vendor address
Delivery address



Creating POs
Printing of POs
Printing Remainders
Changing or canceling POs
Purchasing information

Purchase order

Formal request or instruction from a purchasing organization to a

vendor or a plant to supply or provide a certain quantity of goods or
services at or by a certain point in time.




Additional data

Creating a Purchase order

Automatically from PR

Set automatic PO indicator for material and vendor

Maintain Purchasing info record

Maintain source list

Fixed vendor

PR from MRP or Manually created PR

Assign manually or automatically

Process the assigned PR to create PO

Create PO - Manually
Manually creating a PO

With reference to PR

Select the PRs

Select the items from PR
Copy the items in to PO
Enter the vendor
Enter the prices and pricing conditions
Requirement tracking number
Update the info record if reqd

Create PO

With reference to RFQ

Select RFQ
Select the items
Copy the selected items in to PO
Enter the Price and pricing conditions
Update the info record if reqd.
Acknowledgement and confirmations

Create PO

With out any reference

In this case you need to enter

Vendor code

Delivery date

Item category

Account assignment category (if reqd)

Requirement tracking number

Order type ( NB For std purchase order)

Plant ( 4000 - default plant )

Storage location

Creating a PO (contd)
Important terms in PO


For creating a PO you need to enter vendor code

Vendor master should exist for this purpose
if you dont want to maintain all the details for a vendor you can
create a one time vendor

Item category


Create PO (Contd)

Account assignment category

Specification of the account assignment objects that are charged in the

case of a purchase order for a material that is intended for direct usage or



Sales order

Production order

Cost center

Types of account assignment

Single account assignment

Multiple account assignment

Create PO (contd)

Delivery date

Date format

Day format

Week format

Month format

Delivery date entered here is only expected delivery date

You can also specify a statistical delivery date

Create PO (contd)

Units of measure in PO

The order unit

This is the unit you specify in connection with the order quantity.

The order price unit

This is the unit that applies in connection with the net price and which is
taken as the basis for invoice verification.

If the order price unit does not correspond to the order unit, and if no
conversion factor is specified in the system, you must enter a conversion
factor on the item detail screen.

Create PO (Contd)
Example for units of measure in PO

Order quantity


Order unit


Gross price per unit


Order price unit (number)

Order price unit (of measure)


Conversion factor 24 boxes

1 kg

Create PO (Contd)


This component enables you to store pricing stipulations agreed

with the vendor

Examples are applicable discounts or surcharges, or stipulations

regarding the payment of freight costs in the system.

There are three kinds of price in Purchasing:

Gross price

Price without taking any possible discounts and surcharges into account

Create PO (Contd)

Net price

Effective price

Price taking any applicable discounts and surcharges into account

Net price after deduction of cash discount, with allowance for any
miscellaneous provisions, delivery costs, and non-deductible taxes.

Terms of Payment


Within 14 days 2% discount

Within 30 days due net

Create PO (Contd)

Inco terms

Incoterms are internationally-recognized terms of delivery

reflecting the standards set by the International Chamber of
Commerce (ICC).


FOB - Free On Board. This means that the buyer has to bear all
costs and risks of loss of or damage to the goods from that point.

You can specify Incoterms for an order item that differ from those in
the PO header.

Creating PO from outline agreement

In the initial screen for Create PO,

Select the Outline agreement and items

Copy the items in PO

In the item overview screen

Enter the quantity

If the quantity exceeds the target quantity system gives a warning

Texts in PO
Header texts
Header note
Pricing types
Dead lines
Terms of delivery
Shipping instructions
Terms of payments
Penalties for breach of contract


This component can be used, if you wish to have your vendor provide
you with various kinds of confirmation regarding delivery dates and

It enables you to base your materials planning and control activities

on more up-to-date data than that contained in purchase orders.

Confirmation control key

Shipping notification
Order acknowledgement

Shipping notification
Shipping Notification

A vendors confirmation to a purchasing organization of the delivery

date for a certain quantity of ordered materials

It can be for the date of performance of ordered services also.


A shipping notification consists of several items in which the notified

(confirmed) quantity of the material or service is specified.

Confirmations from the Viewpoint of IM

When you post goods receipts, there are several ways
of finding the associated purchase orders.

Enter the PO number

Enter the shipping notification number
Enter the transport identification code

If you establish a link via the PO number itself, the

relationship is unique

i.e. one goods receipt (GR) against one purchase order

Confirmations from the Viewpoint of IM

If you enter the number of the shipping notification

The system selects all purchase orders containing this number

System suggests the notified quantities for the GR document.


If you wish to match up GRs against POs via the shipping notification
number ,

shipping notification must exist as a separate document.

Releasing the PO
Release Procedure for External Purchasing Documents

External purchasing documents (i.e. purchasing documents other than

requisitions) are released at header level.

Item-by-item release is not possible.

These documents can only be released using the release procedure

with classification.

Release Conditions

The release conditions determine the release strategy in accordance

with which a PO is to be released.

If a PO does not meet the conditions for a release strategy, it is

automatically released for further processing.

Release procedure
Release Strategy

The release strategy defines the approval process for purchasing


The strategy specifies the release codes necessary and the

sequence in which releases have to be effected.

A maximum of eight release codes can be defined.

The assignment of the release strategy to a purchasing document is

based on the release conditions.

Release procedure
Release Code


The release code is a two-character ID allowing a person to

release (clear, or approve) an external purchasing document.

Who may work with which release codes is basically controlled

via a system of authorizations.

Release Prerequisites

The release prerequisites indicate the sequence in which PO must be

approved via the release codes.

Printing a PO
Menu path

Purchase order -> Header -> Messages

Data required

Output type


Communication method

Select the printer

Further Data

Repeat output
Change output

Printing the remainders

Types of expediting letters


A negative number of days means that a reminder is to be issued

to the vendor n days prior to the delivery date

Urging letters

A positive number of days means that a letter or message urging

delivery is to be issued n days after the due date.

Message type - MAHN (Dunning letter)

Changing and blocking POs

If you change a PO after it has been sent to the vendor, a change

document is generated that can be sent to the vendor.

If the goods have already been delivered, then the changes you can
make to the PO are limited.

This tells the vendor what you have changed.

For example, you cannot change the quantity to one that is less
than the quantity delivered.

If the invoice has been received or the goods have been paid for, and
your intended change affects the price, the change will be ineffective.

You can display the PO history for an item to determine whether

deliveries have been received or the item has been invoiced.

MM - Inventory management

Course Objectives
On conclusion of this course, you
should be able to
Do planned and unplanned goods receipts
Do Issue of Goods
Do transfer posting of goods
Manage stocks of the company on both

quantity and value basis



Integration with other modules
Type of stocks
Concept of material documents
Goods movements
Movement type concept

Inventory management - overview

What is inventory management ?

SAP's Inventory Management system allows you to

manage your stocks on a quantity and value basis

The stocks are managed not only on a quantity basis but also by
value - a prerequisite for cost accounting. With every goods
movement, the following values are updated:

the stock value for inventory management

the account assignment for cost accounting

the corresponding G/L accounts for financial accounting via automatic

account assignment

What is inventory management ?

Planning, Entry, and Proof of Goods Movements

Goods movements include

external movements (goods receipts from external procurement,

goods issues for sales orders)

internal movements (goods receipts from production, withdrawals of

material for internal purposes, stock transfers, and transfer postings).

For each goods movement a document is created which is used by

the system to update quantities and values and serves as proof of
goods movements.

Integration with other modules

Integration in Materials Management (MM)

As a component of Materials Management, Inventory Management is

directly linked with Material Requirements Planning , Purchasing, and
Invoice Verification.

Inventory Management forms the basis for material requirements

planning, which takes into account not only physical stocks but also
planned movements (requirements, receipts).

Quantities and values from the purchase order and the goods receipt
document are checked to ensure conformity with those in the invoice.

Integration with other modules

Integration in Production Planning (PP)

Inventory Management is closely linked to the Production Planning


Inventory Management is responsible for staging of the components

required for production orders

Goods issue against production orders

The receipt of the finished products into the warehouse is posted in

Inventory Management.

Integration with other modules

Integration in Sales & Distribution (SD)

As soon as you enter a sales order, you can initiate a dynamic

availability check of stocks on hand.

When the delivery is created, the quantity to be delivered is marked

as "Scheduled for delivery."It is deducted from the total stock when
the goods issue is posted.

It is also possible to create sales order stocks.

These SD transactions are depicted in the Sales & Distribution


Integration with other modules

Integration in Quality Management (QM)

In the case of a goods movement, the system determines whether

the material is subject to an inspection operation.

If so, a corresponding activity is initiated for the movement in the

Quality Management system.

Financial Accounting (FI)

Automatic account assignment, a procedure during which the system

determines the accounts relevant for the given goods movements.

Integration with other modules

Controlling (CO)

The interface to the cost accounting system is activated in the

case of material consumption

For example, when materials are issued for various account

assignment objects such as orders or cost centers.

Cost accounting is also involved when goods receipts are

assigned directly to cost centers or orders.

IM - Material Master
Relevant views


Price and accounting information.


type of price control

valuation class.

Materials Planning

Information for materials planning.


safety stock, reorder level, availability check.

IM - Material Master


Procurement information for a material.


overdelivery and underdelivery tolerances

purchasing order unit of measure (order unit).


Information for warehousing and storing the material.


unit of issue

storage conditions, fixed bin location

IM - Material Master

Quality Management

Information for sampling and inspecting a material.


indicator for goods receipt via quality inspection

Work Scheduling

Information for producing the material.


production unit

overdelivery and underdelivery tolerances allowed.

IM - Data Required
For Inventory Management, you must maintain the
following data:

Plant data

This data can be maintained via different views (for example, via
Purchasing, Storage, Work scheduling).

You have to maintain at least one view that requires the entry of
the organizational level plant.

Valuation data

Valuation data is required for managing the stock by value.

You maintain this data via the Accounting view.

IM - Data Required

Storage location data

You maintain the storage location data via the Storage view.
If a material is located in a storage location, the storage data for
that storage location must exist in the material master record, so
that the system can manage the stock quantities at storagelocation level.

Storage data can be manually entered when the material master

record is created

It can be automatically created during the first goods movement in

that storage location.

Types of stocks
Total valuated stock

Sum of all valuated stocks of a material.

It consists of all the types of stock your company owns.

Unrestricted-use stock

Company's own stock that is physically located in the warehouse,

valuated, and not subject to any kind of usage restrictions.

quality inspection stock

Company's own stock that is in quality inspection.

Types of stocks

Stock in quality inspection is valuated but does not count as

unrestricted-use stock.

For MRP, it is either available or not available, depending on how the

system is set.

Blocked stock

Company's own stock that should not be used.

It does not count as unrestricted-use stock for Inventory Management

It is usually not available for MRP.

Types of stocks
Restricted-use stock

Valuated stock of a material managed in batches held by a company

(and belonging to that company)

Usage of this stock is subject to certain restrictions. This category of

stock is only used when batch status management is active.

Blocked stock returns

Stock that was returned by the customer and conditionally accepted.

It is neither valuated nor does it count as unrestricted-use stock.

Types of stocks
stock in transfer

Quantity that was already withdrawn from stock at the issuing

location but that has not yet arrived at the receiving location

Stock in transfer is managed in the valuated stock of the receiving

location, but it does not yet count as unrestricted-use stock.

Stock in transit

Stock in transfer that is created in the case of a stock transfer via a

stock transport order.

Types of stocks
Available stock

Dynamic stock that is calculated by MRP taking any receipts, issues,

the current available stocks into account.

Which requirements, receipts, and issues are included in the

availability check is defined in the Customizing system.

Reserved stock

Sum of all quantities of a material that are reserved for withdrawal.

Reserved stock is usually not available from the point of view of MRP

For Inventory Management it still counts as unrestricted-use stock.

Types of stocks
Planned receipts

Sum of all quantities whose receipt has been planned with reservations.

Planned receipts are usually already available from the point of view of

For Inventory Management they do not yet count as unrestricted-use


Open PO quantity (total)

Sum of all outstanding PO quantities for a material.

The open PO quantity usually increases available stock in MRP

It does not increase unrestricted-use stock in Inventory Management.

Types of stocks
Open order quantity (total)

Sum of all outstanding order quantities for a material.

The open order quantity usually increases available stock in MRP

It does not increase unrestricted-use stock in Inventory Management

Goods receipt blocked stock

Sum of all quantities of a material that were delivered by vendors for

purchase orders and that have been conditionally accepted.

GR blocked stock is neither valuated nor does it count as


Types of stocks
Stock scheduled for delivery

Sum of all current deliveries to customers for which goods issues have
not yet been posted.

Like reserved stock, stock scheduled for delivery is usually not

available from the point of view of MRP

It counts as unrestricted-use stock for Inventory Management.

Negative stocks

Negative stocks are required if, for example, goods issues are entered
before the corresponding goods receipts for organizational reasons
and the material is already physically located in the warehouse.

Goods movements
Definition of Goods Movement

A goods movement is an event that causes a change in stock.

Good receipt

A goods receipt (GR) is a goods movement with which the receipt of

goods from a vendor or from production is posted.

Goods issue

A goods issue (GI) is a goods movement with which a material

consumption, or a shipment of goods to a customer is posted.

Goods movements
Stock Transfer

Transfer of material from one plant to other plant or from one storage
location to other storage location

Transfer Posting

changes in stock type or stock category of a material.

Examples of transfer postings are:

Transfer Postings From Material to Material

Release from quality inspection stock

Transfer of consignment material into company's own stock

The document concept

When posting a goods movement in the SAP System,
the following documents are created:

Material document

Accounting document

a material document is generated that serves as proof of the


If the movement is relevant for Financial Accounting an

accounting document is created

Cost accounting Document

Movement types
Movement Type

When you enter a goods movement in the system, you must enter a
movement type to differentiate between the various goods

A movement type is a three-digit identification key for a goods



Goods receipt for a purchase order 101

Goods issue for a cost center


Release from quality inspection stock


Movement types
Control Functions of the Movement Type

The movement type has important control functions in Inventory


For example, the movement type plays an important role in

updating of quantity fields

updating of stock and consumption accounts

determining which fields are displayed during entry of a document in

the system

Material documents
Changing a Material Document

you can not change a document once it has been posted.

If you made a typing error when entering a goods movement you

must reverse the movement with a reversal document

Although you cannot change a posted document, you can use the
function "Change Material Document" to

enter additional information for the document.

print a goods receipt/issue slip for the document

Planning goods receipts

Referencing Document During Entry of Goods

The documents used to plan goods receipts serve as reference

documents for entering the goods movement

GR for purchase order

Return Deliveries
When you enter the return delivery, you should
reference the purchase order or the material document,
so that the system can

suggest data (for example, the storage location), to simplify data


perform certain checks (the returned quantity must not exceed the
delivered quantity)

reduce the quantity delivered to-date

reverse other updates that occurred (for example, for goods receipt
into consumption) when the goods receipt was entered

Shelf Life Expiration Date Check

When you enter a goods receipt, it is possible to check
the shelf life of a material.

The shelf life is only checked if the following prerequisites are met:

The minimum remaining shelf life is maintained in the material

master record or in the purchase order.

The minimum remaining shelf life is the minimum number of days for
which the material must keep for the goods receipt to be accepted by
the system.

Other goods receipts

initial entry of stock balances
external goods receipts without a purchase order
internal goods receipts without a production order
goods receipts of by-products
deliveries free of charge
returns from the customer


Goods issue for an order

Results of a Goods Issue Posting

A goods issue has the following results in the system:

material document is created

accounting document is created

Creation of a Goods Receipt/Issue Slip

Stock Update

Update of G/L Accounts

Consumption Update

Reservation Update

Order Update

Printing documents


Course Objectives
On conclusion of this course, you should be
able to
Enter and verify vendors invoice
Enter and verify vendors excise invoice
Devalue materials
Carry out physical inventory



Invoice entry and verification

Credit memo
Excise invoice
Material devaluation
Physical inventory
Inventory management information

MM - invoice verification
Invoice Verification in Materials Management serves
the following purposes:

It completes the materials procurement process

It allows invoices that do not originate in materials procurement (for

example, services, expenses, course costs, etc.) to be processed

It allows credit memos to be processed, either as invoice

cancellations or discounts

Invoice Verification does not handle the payment or the

analysis of invoices.
The information required for these processes is passed
on to A/C department.

Invoice verification
Invoice Verification tasks include:

Entering invoices and credit memos that have been received

Executing the account postings resulting from an invoice

Checking invoices that were blocked because they varied too

greatly from the purchase order

Checking the accuracy of invoices with respect to contents,

prices, and arithmetic

Updating certain data in the SAP system, for example, open

items and material prices

Types of Invoice Verification

As a rule, an invoice refers to a transaction for which
the issuing party requests payment.
Invoice Verification differs depending on the type of
invoice involved:

Invoices based on purchase orders

With purchase-order-based Invoice Verification, all the items of a

purchase order can be settled together,

Invoices based on goods receipt

With goods-receipt-based Invoice Verification, each individual

goods receipt is invoiced separately.

Types of Invoice Verification

Invoices without an order reference

When there is no reference to a purchase order, it is possible to

post the transaction directly to

a material account
a G/L account
or an asset account.

Data required for invoice verification

The key data required for Invoice Verification is

Master data

Transaction data

Material data

Material data is information on the materials bought or produced in

the company

Vendor data

Vendor data provides information on the suppliers a company deals


Data required for invoice verification

Accounting data

Accounting data is used to define G/L accounts

Transaction data

Transaction data records transactions or events in the SAP system.

Purchasing document

Material document

Accounting document

Invoice data
An invoice contains various information, such as:

Who issued the invoice?

Which transaction does the invoice refer to?

How much tax do you have to pay?

If the invoice refers to a particular transaction, the

system will automatically retrieve information
pertaining to the transaction

Terms of payment

Quantities to be invoiced

The amounts the system expects per item

Screens for Invoice Verification

The initial screen

This contains general data such as

company code


invoice reference.

The vendor screen

This contains data on the vendor

The terms of payment

Screens for Invoice Verification

The selection screen

This lists the items of the transaction specified on the initial


The layout of the selection screen depends on whether the

invoice is based on a purchase order or a goods receipt.

Invoice Based on a Purchase Order

All the purchase order items are listed.

The quantity that is still to be billed (i.e. the difference between the
quantity delivered and the quantity invoiced so far) appears as a default
in the Quantity column.

Screens for Invoice Verification

Invoice Based on a Goods Receipt

Goods-receipt-based invoice verification must have been defined in

the purchase order.

If the GR-IV field on the item screen in the purchase order is not
selected, the goods receipt cannot be settled in this way.

There are two ways of finding the correct transaction in goodsreceipt-based Invoice Verification:

You can enter a delivery note number or a GR document number and

the system will list the items for the goods receipts on the selection

you can enter a purchase order number and the system will list all
the GR documents

Parking the invoice

Preliminary Posting

You can enter an invoice (or a credit memo) without posting it and
simply "park" it.

If you park an invoice or a credit memo the system does not make
any postings.

A parked document can be changed as often as you like.

When data is added or changed, the changes are noted by the


When no further changes are required, you can then post the parked

Parking the invoice

The preliminary posting function can be of great
advantage if:

You are interrupted when entering an invoice. You can park the
document and continue processing it later on. This saves you time
having to enter the data twice.

You wish to clear up some questions before you post an invoice. You
can park the document and continue processing it later on.

You wish to split the Invoice Verification process. One employee can,
for example, park an invoice without checking it, while another carries
out the actual checks and posts the document after making any
necessary corrections.

Data Update When Posting an Invoice

When you post an invoice, the system carries out the
account movements and updates the following

The system generates a Financial Accounting document that displays

the accounts involved in the posting and the amounts posted to these

The system creates a purchase order statistic for each item in the
purchase order.

The moving average price is updated in the material master record If

the invoiced price differs from the price in the purchase order for a
material with moving average price control

Blocking the invoice

When an invoice is blocked, Financial Accounting cannot
pay the invoice.
The invoice must first be released in a separate step before
it can be processed.
Variances in an Invoice Item

Quantity variance (M)

Price variance (P)

Variance in order price quantity (G)

Schedule variance (T)

Quality inspection (I)

Credit memos
The term credit memo always refers to a credit memo
from the vendor.
Posting a credit memo always leads to a debit posting
to the vendor account.
Two types of credit memos are possible:

Credit memos that refer to a purchase order or goods receipt

Credit memos that do not refer to a transaction.

Processing of credit memos is same as invoice


Types of Delivery Costs

In the SAP System, there are two types of delivery


Planned delivery costs

They are entered in the purchase order. Provisions are set up for the
relevant costs at goods receipt. The delivery costs posted at goods
receipt can be referenced at invoice entry.

Unplanned delivery costs

They are only entered when the invoice is entered. No provision is

made at goods receipt.

Physical inventory
Every company must carry out a physical inventory of
its warehouse stocks at least once per fiscal year to
balance its inventory
Stocks that can be inventoried

unrestricted-use stock in the warehouse

quality inspection stock
Blocked stock

Physical Inventory Process

The process of physical inventory can be divided into
three phases:

Physical inventory preparation

Create a physical inventory document.

Block materials for posting.
Print and distribute the physical inventory document.

Physical inventory count

counting stocks
entering the result of the count on the physical inventory
document printout

Physical inventory

Physical inventory analysis

entering the result of the count into the system

initiating a recount, if necessary
posting inventory differences

Processing Steps

Creating a physical inventory document

Entering the Physical Inventory Count
Post inventory differences

Physical inventory
posting the physical inventory count and inventory

If a physical inventory document exists, the following are combined in

this step:

The count is posted.

Any inventory differences are posted.

Posting inventory differences without reference to the

physical inventory document

A physical inventory document is created.

The count is posted.

Any inventory differences are posted.

Inventory management information

You can perform the following functions by selecting
Environment from the Inventory Management menu.

List display

The List display function offers reports for documents posted in Inventory

Example: material documents for a material.

Stock display

Example: Stock overview


The Information function allows you to display data (master data,

transaction/movement data) from other applications.

Example: displaying a purchase order.

Inventory management information

Balances display

The Balances display function offers analysis of the stock

accounts and of the GR/IR clearing account.


The Consignment option permits analysis of the consignment

stocks from vendors as well as the consignment stocks and the
returnable packaging stocks at the customers site.

Batch where-used list

Batch search strategy

Inventory management information

Material analysis

Stock values

Receipts and issues

Inventory turnover

Inventory turnover of the value of valuated stock is calculated as

Value of total consumption / Value of average valuated stock


Range of coverage

The range of coverage of the value of valuated stock is calculated as follows:

Value of valuated stock / value of average total usage / day