Vendor Master Data & Records, and Purchasing Information Data EGS 5620 Enterprise Systems Configuration Spring, 2016

2 Topics of Vendor Management 1. Type of buyer/supplier relation ship 2. Trend of buyer/supplier relation ship 3. Benefits of managing supply base 4. Process for building a supply base 5. Evaluation and selection for supplier 6. Outline agreement 7. Contract management

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.3 1. Types of Buyer/Supplier Relationships Antagonistic ◦Parties view each other as the enemy (lose/lose) Adversarial ◦Each party attempts to maximize their gain (win/lose) Cooperative ◦Parties understand the benefits of working together (win/win) Collaborative ◦Parties look for opportunities to create value (win/win)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.4 2. Trend in Buyer/Supplier Relationships Traditional purchasing process tends to ◦Create an environment of mistrust and low bidder mentality, ◦Leading to higher total purchasing costs Trend is ◦To target collaborative partnership ◦To establish long term product/service supply contact agreements via identifying, qualifying, and cultivating longer term suppliers/partners.

5 3. Benefits of Managing Supply Base 1) Contract with only world-class suppliers 2) The fewer suppliers, the lower the purchasing overhead 3) Purchasing can pursue strategic sourcing issues, instead of clerical functions 4) Streamline the supply chain 5) Improve overall quality 6) Improve delivery performance

6 4. Process for building a supply base 1) Identify need for long term supplier contract (agreement) 2) Determine specific sourcing requirements 3) Identify potential suppliers 4) Determine method of evaluating suppliers 5) Select supplier for contract (agreement) 6) Negotiate and execute contract (agreement)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.7 5. Evaluation & Selection for Suppliers A critical step is to identify and evaluate potential suppliers It usually involves supplier development aiming to ◦Develop partnership with good (product quality) suppliers ◦Improve total cost and delivery performance of purchased materials and services Qualification process includes ◦Vendor’s qualification ◦Vendor’s product/service qualification (vendor sub- range)

8 6. Outline Agreement Long-term purchase agreements Can be divided into the types below: ◦Contracts  Centrally agreed contracts  Distributed contracts ◦Scheduling agreements, referencing a centrally agreed contract Can be subject to a release (approval or clearance) procedure

9 7. Contract Management Track supplier performance using metrics for ◦On-time delivery ◦Material and/or service quality ◦Returned materials ◦Expedite issues ◦Pricing analysis Resolve problems Engage in continuous improvement process Terminate/renew contract agreement

Vendor Master Data & Records, and Purchasing Information Data SAP Implementation Vendor Master Data & Records, and Purchasing Information Data SAP Implementation

11 Vendor Master Data & Records, and Purchasing Information Data Vendor master data and records are maintained by both ◦Purchasing, and ◦accounts payable (A/P) Purchasing information data are maintained primarily by ◦purchasing

12 Vendor Master Data and Purchasing information 1. Vendor master data 2. Purchasing info record 3. Source list 4. Purchasing tolerance 5. Automatic account assignment

13 1. Vendor Master Data Includes all data required for ◦processing business transactions and ◦corresponding with vendors Information is shared between the ◦purchasing departments, and ◦accounting

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved Vendor Master Data (-continued) A master record must be created for every vendor in three sections: ◦General data, ◦Company Code data (Financial Accounting - FI), and ◦Purchasing data (Material Management - MM) Purchasing data Condition Control data Partner functions Company code data Account management Payment transactions General data Address Control data

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved Vendor Master Data – General data Vendor general data include: Address Control

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.16 General Data – Address Address Vendor Name Search Term Street address City, Region Postal code Country Communication Language Telephone, Fax, 1.1 General Data – Address

General Data – Control Data Account Control Customer (if the vendor is both a vendor and a customer) Trading partner (if the vendor is a part of an independent company) Authorization Tax Information ◦Tax codes  used to enter ID number of the vendor ◦Fiscal address ◦Country code ◦City code Reference Data / Area ◦International locator number (ILN)  used to identify a legal, functional, or physical location within a business or organizational entity ◦Industry key  allows similar vendors to be grouped by industry ◦Transport zone ◦Standard carrier access code (SCAC)

January Control Data (- continued)

Vendor Master Data – Company code data Vendor company code data are: Accounting information Payment transaction Correspondence

January Accounting Information Accounting Information ◦Reconciliation Account Reconciliation in G/L is at the summary level. Postings to sub-ledgers (such as vendors) are automatically concurrently posted to the corresponding reconciliation account (Account Payable – A/P for purchase and Account Receivable A/R for sales) in G/L. ◦Sort Key (optional)  used to select a sort for the allocation field ◦Release Group (for payment, optional)  the release-approval group can be defined and configured to allow only those in the group to be able to “release for payment

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved Accounting Information (- continued) Interest Calculation ◦Interest Calculation Indication  for automation interest calculation, and is configured by accounting department ◦Interest Calculation Frequency  used to select a period for calculation of interest Withholding Tax ◦Withholding Tax Code ◦Exemption Number

Accounting Information

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved – Payment Transactions Payment Data ◦Payment Terms (cash discounts and favorable payment periods offered by vendor) ◦Tolerance Group (the limit to which an event can deviate) ◦Check Double Invoice (to check for double or duplicate invoices when they are entered) ◦Check Cashing Time Automatic Payment Transactions ◦Payment Methods ◦Alternate Payee ◦Payment Block(prevent any open items from being paid) Invoice Verification ◦Tolerance Group

– Payment Transactions

Correspondence Accounting Dunning Data ◦Dunning Procedure  To remind vendors to deliver the material from the purchase orders ◦Dunning Block  If selected, the vendor is not for dunning run ◦Dunning Recipient ◦Date of Legal Dunning Procedure Correspondence information ◦Local Processing ◦Accounting Clerk ◦Account With Vendor  used to identify the company ◦Clerk at vendor  the contact person at the vendor side

Correspondence Accounting

Vendor Master Data – Purchasing data Vendor purchasing data include: Condition Sales data Partner functions

Vendor Master Data – Purchasing data

Vendor Master - Purchasing Data Conditions ◦Order Currency ◦Terms of Payment ◦Incoterms (next slide) ◦Minimum Order Value Sales Data ◦Salesperson ◦Telephone ◦Account with vendor

Purchasing Data Incoterms (International Commercial Terms) are standard trade definitions used in international contracts. The International Chamber of Commerce based in Paris, devised these standard trade definitions. The 13 incoterms are divided into four groups (arrival, departure, carriage paid by seller, carriage not paid by seller). GroupIncotermLong NameLocation E-DepartureEXWEx workNamed Place D - ArrivalDAFDelivered at FrontierNamed Place D - ArrivalDESDelivered Ex ShipPort of Destination D - ArrivalDEQDelivered Ex QuayPort of Destination D - ArrivalDDUDelivered Duty UnpaidDestination D - ArrivalDDPDelivered Duty PaidDestination C- PaidCFRCost and FreightPort of Destination C- PaidCIFCost, Insurance, FreightPort of Destination C- PaidCPTCarriage Paid toDestination C- PaidCIPCarriage, Insurance PaidDestination F - UnpaidFCAFree CarrierNamed Place F - UnpaidFASFree Alongside ShipPort of Destination F - UnpaidFOBFree on BoardPort of Destination

Vendor Master – Purchasing data Control Data Acknowledgement Required To indicate if acknowledgement is required upon receipt of the order Automatic Purchase Order To allow automatic issuance of purchase order Good receipt-based invoice verification To perform invoice verification based on the goods receipt amounts Subsequent settlement To allow a rebate Default Data Material Purchasing Group Planned Delivery Time Confirmation control (confirmation type and sequence)

Purchasing Data – Partner Functions Partner Functions ◦Used to define the relationships between the vendor (or customer) and the company. List of (Vendor) Partner Functions ◦AZalternative payment recipient ◦CAcontract address ◦CPcontact person ◦ERemployee responsible ◦GSgoods supplier ◦OAordering address ◦PIinvoice presented by ◦VNvendor

33 2. Purchasing Info Record The purchasing info record provides continuously updated information about ◦the relationship of a specific material with a specific vendor ◦Order unit, price, price changes, tolerances, reminder information, historic data, statistics, texts ◦Choice of automatic or manual updating

34 2. Purchasing Info Record

35 2. Purchasing Info Record

36 3. Source List It stores information about where to acquire a given material for a given period of time It specifies whether this source should be used by Materials Requirement Planning (MRP)

37 4. Purchasing Tolerances A tolerance limit set for allowed variance before a warning/error message is displayed ◦Price variance  Compares the price in the purchase order with the valuation price stored in the material master ◦Maximum cash discount  This tolerance limit is set to assure that cash discounts do not exceed allowable discounts

Goods Receipts Tolerances Purchase order price quantity ◦Two tolerance levels maintained per item  The maximum percentage variance before a goods receipt postings is not allowed  A percent variance that generates a warning message but allows posting Moving average price variance ◦the maximum moving average price change allowed

Invoice Receipts Tolerances Tolerance limits configured for invoice receipts: price, quantity, and blanket purchase orders The tolerances include: ◦Amount for item with or without order reference ◦Percentage Over/Under Quantity Variance ◦Exceed amount: quantity variance ◦Blanket purchase order (value and time limit) ◦Price variance

40 5. Automatic Account Assignment Created to avoid manual postings of financial transactions which follow goods movements to reflect the values of transferred materials Used across all modules to keep track of the values of materials that are being consumed (e.g., production), or transferred into other valuation areas of the company Is a set of rules and master data which enable the financial tracking of logistics movement

41 5. Automatic Account Assignment Valuation Grouping Code (-continued) Plant – P004Plant – P001 Grouping Code G001 Plant – P003 Plant – P002 Grouping Code G002 Plant – P005 If automatic account determination within a chart of accounts is to run differently for certain company codes or plants (valuation areas), assign different valuation grouping codes to these valuation areas.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved Automatic Account Assignment Transaction Keys (-continued) Transaction Keys ◦Transaction keys are used to determine accounts (or posting keys for line items) which are created automatically by the system. ◦Transaction keys are defined in the system.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved Automatic Account Assignment Transaction Keys (-continued) Transaction Keys ◦Inventory Postings  BSX ◦Offsetting Entry for Inventory Postings  GBB ◦Materials Management Small Differences  DIF ◦Cost (price) differences (PPV)  PRD ◦Goods receipt / inv. receipt clearing acct  WRX

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved Automatic Account Assignment Modifier (-continued) Modifier – modifies the transaction key for various movement types ◦Blank – Goods receipt from purchase order with account assignment ◦VBR – Goods issue to consumption ◦VAX – Goods issue to sales – post to cost of goods sold ◦AUF – Goods receipt from a production order – post to production settlement ◦Etc. – Many others

Vendor Master Data & Records, & Purchase Information Records Global Bike, Inc.

Global Bike Inc. : Supplies

Global Bike Inc. : Vendor Master

48 Material Types & Valuation Classes

49 Automatic Account Assignment

Exercises: (Due date 2/29/2016) 1: Define Production Scheduling Profile 2: Define Production Scheduler 3: Configure Automatic Postings 4: Activate Material Requirements Planning 5: Define Checking Control 6: Define Scheduling Parameters 7: Define Order Dependent Parameters 8: Define Confirmation Parameters 9: Carry Out Maintenance of Materials 10: Carry Out Maintenance of Production 11: Define Valuation of Goods Received 12: Define Controlling (CO) Settlement Document Number Ranges 13: Create Vendors 14: Create purchasing Info Records for trading materials 15: Create source list for trading materials