• SAP Materials Management (MM) is a part of Logistics area and helps to manage the procurement activity of an organization from procurement.
• It supports all aspects of material management (planning, control etc).
• It is the backbone of the Logistics area which incorporates modules like Sales and Distribution, Production Planning, Plant Maintenance, Project Systems, Warehouse Management which are extremely obsessed on Materials Management module.

Ans: Every organization acquires material or services to complete its business needs. The process of buying materials and obtaining services from vendors or dealers is procurement.

Requirement and Information Gathering

Procurement process starts with gathering information about product and its quantity. Then for required products and services, it is necessary to look for suppliers who can satisfy the requirements.

Supplier Contact

After gathering requirements one will look for the suppliers who can fulfill the requirements. Based on that quotation request or information request can be made to suppliers or direct contact can be made with them.

Background Review

Once the supplier is known product/service quality is checked, and any necessities for services such as installation, warranty and its maintenance are investigated. Some samples of the products can be obtained for quality examination.

Negotiation

Some negotiations with suppliers is made regarding price, availability and delivery schedule of the products/services. After this a contract is signed that is a binding legal document between supplier and ordering party. A contract will include all necessary information like price and quantity of material, delivery date, etc.

Order fulfillment

Ordered material will be shipped, delivered to the ordering party and supplier is paid accordingly. Training and Installation of product or services may also be included.

Consumption, Maintenance and Disposal

As the products/service is consumed the performance of the products or services is evaluated and any follow up service support if required is analyzed.

Ans: External procurement − It is the process of procuring goods or services from external vendors. There are 3 basic forms of external procurement generally supported by the Purchasing component of IT system.

One time orders are generally used for material and services that are ordered irregularly.

Longer-term contracts with the subsequent issue of release orders - For materials that are being ordered regularly and in large quantities, we can negotiate deal with the vendor (seller) for pricing or conditions & record then in a contract. In a contract you also specify the validity date.

Longer-term scheduling agreements and delivery schedules - If a material is ordered on an everyday basis and is to be delivered according to an exact time schedule, then you set up a scheduling agreement.

Internal Procurement − Large corporate organizations may own multiple separate businesses or companies. Internal Procurement is process of getting material and services from among identical company. So, each of these companies maintains a complete bookkeeping system with separate Balance, Profit & Loss Statements so that when trade occurs between them it will be recorded.

Ans:

Special Procurement

Special stocks are stocks that are managed differently as these stocks did not belong to company and these are being kept at some particular location.

Consignment Stocks

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

• Plant to Company code
• Purchasing organization to company code
• Purchasing organization to Plant
• Standard purchasing organization to plant

• Standard
• Consignment
• Subcontracting
• Pipeline

Ans: A deletion flag can be set at client level, plant level or storage location level. Transaction MM06 is used to mark a material for deletion.

Ans: Purchasing info record stores information on material and vendor supplying that material. For Example: Vendors current price of a particular material is stored in info record.

Ans: Purchase info record can be maintained at plant level or at purchasing organization level.

Ans: Purchase order is the formal and final confirmation of the requirements which is sent to vendor to supply material or services. Purchase order will include important information like name of material with its corresponding plant, details of purchasing organization with its company code, name of vendor, and date for delivery of material.

Ans: After processing of purchase order by vendor, material is delivered to ordering party and this process is called as goods receipt. So, goods receipt is the phase in which the material is received by the ordering party and the condition and quality are verified. Once material is verified against quality then goods receipt is posted.

Ans: Path to post Goods Receipt −

Logistics ⇒ Materials Management ⇒ Inventory management ⇒ Goods movement ⇒ Goods movement

T-Code: MIGO

Ans: Purchase Order from purchase requisition can be created by following below steps −

T-Code: ME21N

Ans: Request for quotation is a form of invitation that is sent to vendors to submit quotation indicating pricing and their terms and conditions.

RFQ contains details about goods or services, quantity, date of delivery and date of bid on which it is to be submitted.

Ans: In SAP system, you use Document Type to define different methods or procedures for a transaction.

Ans: The Price will be marked zero for free item. We can tick the item as free item while creating PO in system.

Ans: Material type in SAP system is used to group various materials based on some common properties.

Ans: It is 2 digit code and is used to determine the material usability.

• Restricted Stock
• Unrestricted Stock
• Quality Inspection Stock
• Blocked Stock
• GR Blocked Stock

Ans: This is conditionally accepted stock and not the unrestricted stock.

Inter Company

Intra Company

Intra Plant

Ans: Outline agreement is a long term purchasing agreement with vendor containing terms and conditions regarding the material that is supplied by vendor.

Outline agreement are valid up to certain period of time and cover a certain predefined quantity or value.

Ans: No

Ans: Material master contains information related to different material types like finished product, raw material. Material master can be used for identifying a product, purchase material, goods issue or good receipt, MRP and production confirmation.

For Material master data, use T-code: MM01 or go to Logistics → Production → Master Data → Material Master → Material → Create (General) → immediately

Ans: It is used for Production

Ans: Scheduling agreement is a long term outline agreement between vendor and ordering party over a predefined material or service which are procured on predetermined dates over a framework of time.

Ans: A particular material can be procured from different vendors depending upon the requirement. So, total requirement of a material is distributed to different vendor’s i.e. quota is assigned to each source of supply. This is known as quota arrangement.

Ans: Quota rating = (Quota Allocated Quantity + Quota Base Quantity)/Quota

Ans: SAP ERP systems were designed so that business can be conducted in an efficient way. Various documents like purchase order, request for quotation, goods receipt are essential documents in a business. These documents need security i.e. if any of documents is posted incorrectly then business can be affected at various concern levels. So, to secure these documents we have a concept of posting period. Posting period means it will allow you to post and make changes in the documents only in a specific time period.

Ans: Posting period for a company can be defined using five fields which are as follows −

• Maintain Fiscal Year Variant
• Assign Fiscal Year Variant to Company Code
• Define Variants for Open Posting Periods
• Assign Variant to Company Code
• Open and Close Posting Periods

• Invoice verification marks the end of procurement after purchase order and goods receipt.
• Invoice posting will update all related documents in financial and accounting.
• Blocked invoice that vary from actual invoice can be processed through invoice verification.