Vendor Master Data & Records, and Purchasing Information Data EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2013

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.2 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.3 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 ◦Collaborative partnership ◦To establish long term product/service supply contact agreements ◦Via identifying, qualifying, and cultivating longer term suppliers/partners

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.4 Benefits of Managing the Supply Base Contract with only world-class suppliers The fewer suppliers, the lower the purchasing overhead Purchasing can pursue strategic sourcing issues, instead of clerical functions Streamline the supply chain Improve overall quality Improve delivery performance

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.5 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.6 Supplier Evaluation and Selection 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)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.7 Outline Agreement Long-term purchase agreements Can be divided into the types below: ◦Contracts ◦Scheduling agreements Can be subject to a release (approval or clearance) procedure

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.8 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.9 Contracting Questions How will potential suppliers be evaluated and selected? What procedures will be required to manage the contracts (and suppliers)? How will performance be measured? How many are too many suppliers? ◦Too many suppliers cost money ◦Supplier integration ◦Collaborative agreements ◦Supplier development ◦Without material production shuts down What is the risk?

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.10 Creating a Contract Is a long-term agreement with a vendor to provide a material or service ◦For an agreed upon period of time ◦At a negotiated price or quantity Can be created manually or with reference to purchase requisition, Request for Quote (RFQ)/quotation etc.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.11 Contract types Quantity contract ◦Agreement with a particular vendor to purchase a specific quantity of materials.  Example: Target quantity of 50,000 meters of electrical wire at $2/meter. (MK) Value contract ◦Similar to quantity contract except the agreement is to purchase an established monetary value of materials.  Example: Target value of $100,000 for electrical wire. (WK)

Vendor Master Data & Records, and Purchasing Information Data SAP Implementation EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2013 Vendor Master Data & Records, and Purchasing Information Data SAP Implementation EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2013

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.13 Vendor Master Data Includes all data required for ◦processing business transactions and ◦corresponding with vendors Information is shared between the ◦accounting and ◦purchasing departments

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.14 Vendor Master Data & Records, and Purchasing Information Data Vendor master data and records are maintained by both ◦accounts payable (A/P) and ◦purchasing Purchasing information data are maintained primarily by ◦purchasing

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.15 Vendor Master Data A master record must be created for every vendor ◦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 Payment transactions

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.16 Vendor Master Structures of the Data General Data: Address Purchasing Data Vendor General Data Company Code Data Financial Accounting (FI) Purchasing Data (MM)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.17 Vendor Master Data – Typical Screen Vendor attributes that sufficiently differentiate them by their: Address Control Payment Transactions Accounting Information Correspondence Purchasing Data Partner Functions

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.18 General Data – Address Address Vendor Name Search Term Street address City, Region Postal code Country Communication Language Telephone, Fax, Vendor Master General Data – Address

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.19 Vendor Master- General Data – Control Data Account Control Customer (if the vendor is both a vendor and a customer) Authorization Trading partner (if the vendor is a part of an independent company) Group key (combines vendors to enhance the search capacity)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.20 Vendor Master- General Data – Control Data Tax Information ◦Tax codes  used to enter ID number of the vendor ◦Fiscal address ◦Country code ◦City code Reference Data / Area ◦International locator number  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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.21 Vendor Master - General Data – Payment Transactions Bank Details ◦Bank Key  selected from a match code with company code entered ◦Bank Account ◦Account Holder ◦Partner Bank Type (if vendor has more than one bank account, then it allows to sequence those accounts) Payment Transactions ◦Alternative Payee  used to enter another vendor number ◦Instruction Key  To control which statements are given to the banks during the payment order

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.22 Vendor Master – Accounting Information Accounting Information ◦Reconciliation Account  see next slide ◦Sort Key  used to select a sort for the allocation field ◦Release Group  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.23 Reconciliation Account An individual G/L account recorded in line-item detail in the sub-ledger and summarized in the G/L The information entered into the reconciliation account is all line-item data from the vendor account. The reconciliation in the G/L is at the summary level and is used to reconcile against the vendor account at the total level, while the sub-ledger identifies line-item data.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.24 Reconciliation Account Postings to sub-ledgers (such as accounts receivable or accounts payable) are automatically concurrently posted to the corresponding reconciliation account in the General Ledger Thus, the General Ledger is automatically updated and remains in balance with the customer and vendor individual account totals

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.25 Vendor Master – Accounting Information 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.26 Account Groups Identifier that controls which fields must be entered when an account is created Determine a valid number interval for each of the groups (types) of General Ledger accounts that have common attributes Must be created before General Ledger Chart of Accounts master records can be created You must assign each account to an appropriate account group

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.27 Account Groups Chrt/accts Acct group Description From To CHRT BS Balance Sheet (BS) CHRT PL Income Sheet CHRT RA Reconciliation

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.28 Account controlSuppress Req. entry Opt. entry Display Currency Tax category Reconciliation account … Account Group BS Account control Account management Document entry Bank/financial details Interest calculation Joint venture Account Groups

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.29 Field Status Field status controls how the data will be entered for a field when an accounting master record is being used in a transaction Determining whether a field is required, optional, suppressed, or display only Field status controls are also relevant to a specific activity — create, change, or display

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.30 Field Status Variant Fld status groupText ZALLAll Accounts ZBSABalance Sheet Accounts ZEXPExpense Accounts ZGRIMaterial Management (GR/IR) Accounts ZRCNReconciliation Accounts ZREVRevenue Accounts

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.31 Field status variant (V000) - Group ZBSA - Balance Sheet Acct. General data Additional account assignments Materials management Payment transactions Asset accounting Taxes... General DataSuppress Req. entry Opt. entry Display Assignment number Text Invoice reference … Field Status Variant

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.32 Vendor Master – 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.33 Vendor Master – 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.34 Vendor Master –Purchasing Data Conditions ◦Order Currency ◦Terms of Payment ◦Incoterms (next slide) ◦Minimum Order Value Sales Data ◦Salesperson ◦Telephone ◦Account with vendor

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.35 Vendor Master –Purchasing Data Incoterms 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, and 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.36 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)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.37 Vendor Master – 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.38 Vendor Master – Purchasing Data – Account Group Vendor masters are assigned to a vendor account group Through field status maintenance, vendor account groups can be set up for one-time vendors, regional vendors, and internal vendors The vendor account group controls both type and number range assignment for vendors

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.39 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.40 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)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.41 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.42 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.43 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.44 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.45 Automatic Account Assignment Valuation Grouping Code Plant – P004Plant – P001 Grouping Code G001 Plant – P003 Plant – P002 Grouping Code G002 Plant – P005

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.46 Automatic Account Assignment Transaction Keys Transaction Keys ◦The transaction keys are used to determine accounts or posting keys for line items which are created automatically by the system. ◦The transaction keys are defined in the system.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.47 Automatic Account Assignment Transaction Keys 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.48 Automatic Account Assignment Modifier 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.49 Material Types & Valuation Classes Account category reference: ◦Builds the link between material types and the valuation class(es) 0009 – Reference for Finished Products 0005 – Reference for Trading Goods 0002 – Reference for Operating Supplies 0001 – Reference for Raw Materials Account Category Reference FERT HAWA HIBE ROH Material Type / /3001/3002/3003 Valuation Class

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.50 Material Types & Valuation Classes Material Type ROH (Raw Material) Acct Cat. Ref 0001 – Raw Materials Valuation Class 3000 (Raw)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.51 Account 7210_ _ Automatic Account Assignment Plant P_ _ _ Valuation Class 3100 (Trading Good) Grouping Code G_ _ _ Offsetting entry GBB (Inv. posting) Account Modifier Blank (Goods receipt) Valuation Class 3030 (Supplies Good) Grouping Code G_ _ _ Goods Movement GBB (Inv. posting) Account Modifier Blank (Goods receipt.) Account 7400_ _

EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2013 Vendor Master Data & Records, & Purchase Information Records PEN, Inc.

Pen Inc. : Supplies

Pen Inc. : Vendor Master

Pen Inc. : Purchase Information Records

Pen Inc. : Source List

Exercises: 114. Create sales organization 115. Assign sales organization to company code 117. Assign distribution channel to sales organization 120. Assign division to sales organization 122. Set up sales areas 125. Assign plant to sales organization and distribution channel 126. Assign shipping point to plant 127. Create sales views for trading goods 204. Create raw materials inventory account 205. Create finished goods inventory account 206. Create raw materials expense account 207. Create finished goods expense account

Exercises 247. Define storage location for raw materials 248. Create production scheduling profile 249. Create production scheduler 250. Control Parameters for MRP 251. Assign availability check to order type 252. Define scheduling parameters for operations 253. Define control parameters for order type 254. Create confirmation parameters 255.Define valuation for goods received 256. Create material master for raw materials 257. Create material master for finished products