1. Procurement Processes EGS 5620 Enterprise Systems Configuration Spring, 2016

2. Procurement Processes SAP Implementation

3. Business Process Integration
ECC 6.0
Business Process Integration
January 2008 MM
Transactions
Org Data
Master Data MM
Rules MM
In the Business Process Integration class we use the stool as a metaphor for the SAP structure. There are four basic components needed to run execute SAP. Three of these are the legs of the stool: org data, master data, and rules. These ‘hold up’ the transactions. Transactions cannot be run unless these are setup.
The legs are typically configured during the implementation process.
During BPI 1 we will setup the stool for Finance, Materials management and Sales and Distribution. MM
January 208
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4. Transaction Data Transaction data
ECC 6.0
Transaction Data
January 2008
Transaction data
application data
dynamic, and
unique document number.
Transaction data use organization data, master data, and rules.
Transaction data describing business activities includes
Internal exchange, and
External exchanges
Master data does not change very often
Org data – should not change
Transaction data (application data) – changes every transaction
Transaction data uses/comprised of the master data, rules, and org data.
Every transaction has an audit trail.
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5. Purchasing in SAP ERP Purchasing process resides in
ECC 6.0
Purchasing in SAP ERP
January 2008
Purchasing process resides in
Materials Management (MM) module, and
Finance (FI) module
Master data for the purchasing process exists in (MM) and (FI) modules
Purchasing process may interface with the modules below:
Production Planning (to plan for production),
Quality Management (to check quality at receipt), and
Warehouse Management (to put away)
The execution of purchase order is primarily done in Materials Management, but parts of the procurement process are cross-module. A/P resides in finance, and receipt quality check in Quality Management. Putaway’s from receipt can interface with the Warehouse Management module.
Org structure in MM and FI
Master Data in MM and FI
Rule and transaction Data interface with MM, FI, PP, WW, and QM
January 2008
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6. Procurement Process (Procure-to-Pay)
ECC 6.0
January 2008
Procurement Process (Procure-to-Pay)
Purchase
Requisition
Purchase
Order
3-Way
Match
Notify
Vendor
Payment
to Vendor
This is a standard view of the procure to pay process and the most common. It may vary significantly based upon the company procedures, the products/services purchases and other factors.
SAP allow businesses to tailor it to their needs.
Starts with a requisition or need that needs to be filled. This can come from Planning (MRP), manually or other
The purchase order is the document to fill the need: usually includes the vendor, cost/price, quantity, terms and other pertinent information. [ part one of the 3-way match]
Notifying the vendor
The goods are shipped and brought to the organization
The goods are received (typically at the dock) and then put away [ part two of the three way match]
An invoice is received from the vendor [third part of the 3-way match]
After the tolerances/verification of the 3-way match are met a payment is made according to the terms agreed to on the purchase order.
Vendor
Shipment
Invoice
Receipt
Goods
Receipt
January 2008
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7. Purchase Order Structure
1. Header
Vendor Company
Purch. Org. Date
Purch. Org. group PO Price
Purchase
Order
2. Item Overview
Materials Price/UofM
Quantities Currency
Delivery Date Plant
3. Item details
PO History Tolerances
Line Price Storage
Delivery Schedule

8. Purchase Order Structure

9. Purchase Order Structure: 1. Header
ECC 6.0
January 2008
Purchase Order Structure: 1. Header
information specific to the entire purchase order, such as
Vendor
Purchase organization data
Condition (total purchase price)
Partner
Payment process
Status
The header contains information relevant to the whole document . The items specify the materials or services to be procured. For example, information about the vendor and the document number is contained in the document header, and the material description and the order quantity are specified in each item.
January 2008
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10. Purchase Order Structure: 2. Items Overview
ECC 6.0
January 2008
Purchase Order Structure: 2. Items Overview
Line item – purchasing information required for the item
Item category (standard, consignment, service, …)
Material id and description
Materials or services quantity
Delivery date
Net price
Currency
Plant
Storage location
Measurement unit
Account assignment – What cost center assigned to.
Delivery Schedule – What, how much and when delivered
The items specify the materials or services to be procured. For example, information about the vendor and the document number is contained in the document header, and the material description and the order quantity are specified in each item.
January 2008
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11. Purchase Order Structure: 3. Item Details
ECC 6.0
January 2008
Purchase Order Structure: 3. Item Details
Material data for the item
Quantities/weights
Delivery schedule
Invoice
Conditions (Purchasing price for the item)
Delivery address
Confirmation
Condition control
Subcontracting
Account assignment – What cost center assigned to.
Delivery Schedule – What, how much and when delivered
The items specify the materials or services to be procured. For example, information about the vendor and the document number is contained in the document header, and the material description and the order quantity are specified in each item.
January 2008
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12. Purchase Order: Output Format
ECC 6.0
January 2008
Purchase Order: Output Format
Printed and mailed
Electronic Data Interchange (EDI)
Faxed (hardcopy or electronic)
Extensible Markup Language (XML)
Any number of ways to communicate the PO to the vendor.
January 2008
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13. Search Purchase Orders
ECC 6.0
Search Purchase Orders
January 2008
You can search for the purchase order number with
Material number (T-code: ME2M),
Vendor number (T-code: METL), etc.
If you have any information about the purchase order you look up or order for receipt.
January 2008
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14. MM: Goods Receipt Notify Vendor Vendor Receipt Shipment Purchase Order
Vendor
Receipt
Shipment

15. Goods Receipt – Movement Types
ECC 6.0
Goods Receipt – Movement Types
January 2008
Movement types - stock transactions
Goods receipt
Goods issue
Stock transfer
Movement type determines which
Quantity are updated
Stock types are updated (e.x. QA, Block, unrestricted)
General Ledger (G/L) stock or consumption accounts are updated
Fields are displayed during document entry
Goods receipt A goods receipt (GR) is a goods movement with which the receipt of goods from a vendor or from production is posted. A goods receipt leads to an increase in warehouse stock.
Goods issue
A goods issue (GI) is a goods movement with which a material withdrawal or material issue, a material consumption, or a shipment of goods to a customer is posted. A goods issue leads to a reduction in warehouse stock.
Stock transfer
A stock transfer is the removal of material from one storage location and its transfer to another storage location. Stock transfers can occur either within the same plant or between two plants.
Transfer posting
A transfer posting is a general term for stock transfers and changes in stock type or stock category of a material. It is irrelevant whether the posting occurs in conjunction with a physical movement or not. 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
When you enter a goods movement in the system, you must enter a movement type to differentiate between the various goods movements. A movement type is a three-digit identification key for a goods movement
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
When you enter a goods movement, you start the following chain of events in the system:
A material document is generated, which is used as proof of the movement and as a source of information for any other applications involved.
If the movement is relevant for Financial Accounting, one or more accounting documents are generated.
The stock quantities of the material are updated.
The stock values in the material master record are updated, as are the stock and consumption accounts.
January 2008
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16. Material Movements
When a goods movement takes place it is represented by a Movement Type
Movement types are three-digit keys used to represent a movement of goods
101 – goods receipt into warehouse
102 - reversal of goods receipt for purchase order into warehouse/stores
103 – goods receipt into GR blocked stock
122 – return delivery to vendor
501 - receipt w/o purchase order into unrestricted-use stock
When you enter a goods movement in the system, you must enter a movement type to differentiate between the various goods movements. A movement type is a three-digit identification key for a goods movement.
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

17. Goods Receipt
Goods receipt is a goods movement activity in which we accept goods into inventory.
Data from the purchase order used to verify:
Material, quantity, and so on
Update inventory G/L account automatically
Update purchase order history with the receipt
Update physical inventory
If a material is delivered for a purchase order, it is important for all of the departments involved that the goods receipt entry in the system references this purchase order, for the following reasons:
Goods receiving can check whether the delivery actually corresponds to the order.
The system can propose data from the purchase order during entry of the goods receipt (for example, the material ordered, its quantity, and so on). This simplifies both data entry and checking (overdeliveries and underdeliveries).
The delivery is marked in the purchase order history. This allows the Purchasing department to monitor the purchase order history and initiate reminder procedures in the event of a late delivery.
The vendor invoice is checked against the ordered quantity and the delivered quantity.
The goods receipt is valuated on the basis of the purchase order price or the invoice price.

18. Goods Receipt – Destinations
ECC 6.0
Goods Receipt – Destinations
January 2008
Goods receipt into (destined for) the warehouse
increases total valuated stock by the delivered quantity.
updates the stock value at the same time.
Goods receipt into consumption
only updates the consumption statistics in the material master record
does not update the consumption statistics if the goods movement posting uses the special stock types: sales order stock type and project stock.
Goods receipt posted into blocked stock
maintains the same stock level.
only records it in good receipt block stock of the purchase order history.
Stock Update
Which stocks are updated in the material master record depends on the destination of the goods:
Goods receipt into the warehouse
If the goods are destined for the warehouse, the system increases total valuated stock and the stock type (for example, the unrestricted-use stock) by the delivered quantity. The stock value is updated at the same time.
Goods receipt into consumption
If the goods are destined for consumption, only the consumption statistics are updated in the material master record.
The system does not update the consumption statistics in the material master record, if you post goods movements using the special stock types Sales order stock and Project stock.
Goods receipt into goods receipt blocked stock
If the goods receipt is posted into goods receipt blocked stock (see also Goods Receipts Into Goods Receipt Blocked Stock), the stock level remains the same. The goods are recorded only in goods receipt blocked stock of the purchase order history.
Goods receipt into a new storage location
If you post goods into a storage location that does not yet exist for this material, the storage location data is automatically created in the material master record when the goods receipt is posted.
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19. Goods Receipt – Effects
ECC 6.0
Goods Receipt – Effects
January 2008
Purchase Order (PO) history and Purchase Order (PO) updated
Material Master - stock and value updated
Material and financial documents created and/or updated
Stock and consumption accounts updated
Inspection notification in the Quality Management (QM) module - if active
Notification of goods receipt issued (optional)
Transfer request to the Warehouse Management module (if active)
A goods receipt has the following results in the system:
Creation of a Material Document
When you post a goods receipt, the system automatically creates a material document which serves as proof of the goods movement.
Creation of an Accounting Document
Parallel to the material document, the system creates an accounting document. The accounting document contains the posting lines (for the corresponding accounts) that are necessary for the movement.
From the screen displaying the material document, you can display the accounting document.
Creation of a Goods Receipt/Issue Slip
When you enter the goods receipt, you can print the goods receipt/issue slip Sending a Mail Message to Purchasing
If the GR message indicator has been set in the purchase order, the buyer automatically receives a message informing him of the delivery.
Stock Update
Which stocks are updated in the material master record depends on the destination of the goods:
Goods receipt into the warehouse
If the goods are destined for the warehouse, the system increases total valuated stock and the stock type (for example, the unrestricted-use stock) by the delivered quantity. The stock value is updated at the same time.
Goods receipt into consumption
If the goods are destined for consumption, only the consumption statistics are updated in the material master record.
The system does not update the consumption statistics in the material master record, if you post goods movements using the special stock types Sales order stock and Project stock.
Goods receipt into goods receipt blocked stock
If the goods receipt is posted into goods receipt blocked stock, the stock level remains the same. The goods are recorded only in goods receipt blocked stock of the purchase order history.
Goods receipt into a new storage location
If you post goods into a storage location that does not yet exist for this material, the storage location data is automatically created in the material master record when the goods receipt is posted.
Note, however, that this is only true if automatic creation of storage location data is allowed for both the plant and the movement type in question in the Customizing system. If automatic creation is not allowed, you must add the new storage location to the material master record before you post a goods receipt to it.
Update of G/L Accounts
When the goods receipt is posted, the system automatically updates the G/L accounts by the value of the goods receipt
Updates can also occur in other related applications. In the case of a goods receipt to consumption, for example, the account assignment object (such as a cost center, order, asset, etc.) is debited.
Updates in the Purchase Order
When a goods receipt is posted, the following purchasing data is updated:
Purchase order history
During goods receipt posting, a purchase order history record is automatically created. This record contains data essential for Purchasing, such as: the delivered quantity, the material document number and item, the movement type, and the posting date of the goods receipt.
Purchase order item
If the "delivery completed" indicator is set in the material document, the order item is considered closed, and the open purchase order quantity is set to zero.
Other Updates
Depending on the characteristics of the material, movement, and components used, additional updates are carried out in other components. For example, a goods receipt is relevant for:
Entries to be made in the planning file or independent requirements reduction in materials planning
Statistical data in Inventory Controlling
Vendor evaluation data in Purchasing
Transfer requirements and quantity in the Warehouse Management System
Inspection lots in Quality Management
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20. Goods Receipt – Account Postings
ECC 6.0
Goods Receipt – Account Postings
January 2008
Inventory account is debited at standard price
Goods Receipt/Inventory Receipt (GR/IR) clearing account is credited at purchase order price
Price difference account is debited (credited) with difference between standard price and purchase order price
When you enter a goods movement, you start the following chain of events in the system:
A material document is generated, which is used as proof of the movement and as a source of information for any other applications involved.
If the movement is relevant for Financial Accounting, one or more accounting documents are generated.
The stock quantities of the material are updated.
The stock values in the material master record are updated, as are the stock and consumption accounts.
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21. Goods Receipt – Account posting
No impact on
Financial Accounting (FI)
Purchase requisition
Purchase order
Materials Management (MM) and Financial Accounting (FI)
via automatic account assignment
Goods receipt
Requisition – Nothing really happens unless we get the goods or pay for them
The system does the transactions for you using the automatic account assignment
When we receive these, it can match the receipt against the PO
Debit Inventory (we now have additional inventory value)
Credit GR/IR (we are going to owe/pay for that additional inventory)

22. Invoice Receipt Process
ECC 6.0
Invoice Receipt Process
January 2008
Tasks:
Engage in 3-way match to validate the invoice.
Enter PO number to retrieve the PO and view (verify)
Open dollar amount.
Quantity,
Price,
receiving date,
Vendor name
Enter the invoice number and the dollar amount to be paid
Simulate invoice posting
Post the invoice in SAP
Rules for price differences and where are we going to post those.
Materials Management, Logistics Invoice Verification has the following features:
It completes the material procurement process, which started with the purchase requisition and resulted in a goods receipt.
It allows invoices that do not originate in materials procurement (such as services, expenses, course costs) to be processed.
It allows credit memos to be processed, either as invoice reversals or return deliveries.
January 2008
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23. 3-Way Match for Payment Purchase Order Payment Program Invoice Receipt
ECC 6.0
3-Way Match for Payment
January 2008
Purchase
Order
Debit Credit
Payment
Program
Invoice
Receipt
Verification
Purchase order is matched against the invoice against the amount of the goods receipt. This may vary vendor to vendor according to the vendor info record. If the 3-way match is within tolerance, the payment is sent to the payment program for processing.
Goods
Receipt
January 2008
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24. Invoice Processing - 3-Way Match
Incoming Invoices are reference against a Purchase Order to verify their content, prices, and arithmetic.
If discrepancies arise between the purchase order or goods receipt and the invoice, the system will generate a warning or an error
Depending on system configuration the difference could cause the system to Block the Invoice
Purchase order
- Target quantity -
- Target price -
Goods receipt
- Actual quantity -
Invoice receipt
- Actual price -
It is in Logistics Invoice Verification that incoming invoices are verified in terms of their content, prices and arithmetic. When the invoice is posted, the invoice data is saved in the system. The system updates the data saved in the invoice documents in Materials Management and Financial Accounting.
An invoice can be processed in Logistics Invoice Verification in various ways:
Invoice Verification Online
Invoice Verification in the Background
Automatic Settlements
Invoices Received via EDI
Activate display of the MM and FI document numbers using the user parameter IVFIDISPLAY, by entering the value X for the user. In the standard system, only the document number from Materials Management is displayed.

25. Invoice Verification - 3-way match
ECC 6.0
Invoice Verification - 3-way match
January 2008
Matches the vendor’s invoice to the purchase order and the goods receipt (3rd part of 3-way match)
Matches price and quantity
Updates the purchase order and its history
Updates accounting information
Logistics Invoice Verification is a part of Materials Management (MM). It is situated at the end of the logistics supply chain that includes Purchasing, Inventory Management, and Invoice Verification. It is in Logistics Invoice Verification that Incoming Invoices are verified in terms of their content, prices and arithmetic. When the invoice is posted, the invoice data is saved in the system. The system updates the data saved in the invoice documents in Materials Management and Financial Accounting.
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26. Financial effects of Invoice Posting
When an invoice is posted, the liability is shifted.
From the Goods Receipt/Invoice Receipt account (for the purchase order) to the vendor account
Upon posting invoice, SAP:
Updates the Purchase Order
Updates the Material Master
Creates an Accounting Document
Initiates the payment process within Financial Accounting

27. Invoice Receipt vendor and Reconciliation Account
Amount owed is
assigned and transferred to
vendor account payable and automatically move to Account payable (A/P)
Invoice receipt
Once we get the receipt –
Debit GR/IR – now a wash
Vendor AP Credit – we owe
Some companies book it as a liability right away (previous slides), but it really isn’t until you receive the goods
Unique to SAP

28. Payment to Vendor Can be done automatically or manually
Post Outgoing Payment vs. Payment Program
Elements of the Payment Transaction:
Payment Method
Bank from which they get paid
Items to be Paid
Calculate Payment Amount
Print Payment Medium
Process will create a financial accounting document to record the transaction

29. vendor and account payable is reduced
Vendor Payment
Amount owed is paid to
vendor and account payable is reduced
Bank
Once we get the receipt –
Debit GR/IR – now a wash
Vendor AP Credit – we owe (it is debited: now a wash)
Some companies book it as a liability right away (previous slides), but it really isn’t until you receive the goods
Unique to SAP
Credit bank account (paid, now we have less cash)

30. Procurement Processes
Global Bike, Inc.
Procurement Processes

31. 250
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32. Purchase Requisition (ME51N)
ECC 6.0
January 2008
Purchase Requisition (ME51N)
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33. Purchase Order (ME21N) ECC 6.0 January 2008
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34. Setting for Goods Receipt (MIGO)
ECC 6.0
January 2008
Setting for Goods Receipt (MIGO)
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35. Goods Receipt for PO (MIGO)
ECC 6.0
January 2008
Goods Receipt for PO (MIGO)
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36. Invoicing for PO (MIRO)
ECC 6.0
January 2008
Invoicing for PO (MIRO)
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37. Receipt for PO (F-53) ECC 6.0 January 2008
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38. Check PO History (ME23N) ECC 6.0 January 2008
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39. Check Inventory ECC 6.0 January 2008
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40. Lab 5 Exercises: (Due date 3/21/2016)
1. Create raw materials
2. Create purchase requisitions for trading goods
3. Create Purchase orders for trading goods from PR
4. Create goods receipt for trading goods
5. Post invoice for purchasing trading goods
6. Pay vendors for trading goods
7. Create purchase order for raw materials
8. Create goods receipt for raw materials
9. Post invoice for purchasing raw materials
10. Pay vendor for raw materials
11. Review purchase order history
12. Review stock status after purchase orders processed