What is SAP MM Module?
We will start off this SAP MM tutorial by learning the SAP MM module. SAP MM module is an integral part of SAP ERP software. SAP Material Management is used by the various business organization to manage their purchasing and transactional data as it is both cost and time efficient. SAP Material Management is part of the logistic function which helps the industry from procurement to delivery of products. SAP MM module consists of different units to manage material procurement and vendors, check the material condition and quality, and payment of the vendors. Learn more about SAP Material Management in this SAP MM training to get ahead in your career!
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What is SAP Business Process in SAP MM Module?
In this SAP MM Tutorial, we will learn about SAP Business Process. SAP Business Process is an integral part of the SAP MM module. It deals with sales, production, distribution, unit maintenance, planning, and warehouse management of an organization. It helps manage inventory and human resources of a company.
Before moving further, let’s see the topics covered in this SAP MM tutorial:
Features of SAP MM Module:
In this SAP MM tutorial, we will see some of the features of the SAP MM module.
Some of the key features of SAP MM Module are as follows:
- It deals with inventory management and material management.
- It is a process that keeps in check the scarcity or breach in the supply chain of an organization.
- It manages procurement activities.
- To accelerate productivity and cut the cost, it manages material (products/services) and resources of an organization.
- It deals with Master Data, Valuation of Material, Material Requirement, Invoice Verification, etc.
Advantages of SAP MM Module
- It reduces the cost of operations.
- It minimizes inventory losses by removing unnecessary or obsolete material.
- Automatic material management and procurement activities lead to a smoother and effective process.
Procurement Process In SAP MM Module
This SAP MM tutorial will help you learn about the Procurement Process in a SAP MM module. This SAP MM tutorial will discuss the different types of Procurement Process.
Every organization requires material or service to meet their needs, and thus, they purchase them. This process is known as procurement.
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Types of Procurement in SAP MM Module
Learn about different types of procurement through this SAP MM tutorial.
There are two types of the procurement:
- Basic Procurement
- Special Procurement
Now, this SAP MM tutorial will deal with Basic Procurement.
The process of buying the right material and services in an appropriate quantity at the lowest price and at the right time is known as basic procurement.
What is Basic Procurement Lifecycle?
This SAP MM tutorial provides you with different Procurement lifecycle which are:
- Gathering Information: The procurement process initiates with the collection of information about a product and its quantity. Then according to the required products and services, suppliers must be contacted.
- Suppliers: Based on the requirement, suppliers are contacted and requested to fulfill the requirement.
- Consumption, Maintenance, and Disposal: Products and services get evaluated according to their performance. Based on their performance, it gets decided whether the order will get repeated from the same supplier or a new supplier will be contacted.
Now, this SAP MM tutorial will talk about the Special Procurement under the SAP MM module.
The stocks which do not belong to a company and stored at a specific location are known as special stocks. The method to procure these stocks is known as special procurement.
Types of special procurement and special stocks are:
- Consignment Stocks: The material which is available at store premises is known to be consignment stocks. This material belongs to the seller, but to use it you have to pay the vendor.
- Third-party Processing: In third-party processing, the company passes its orders to the vendors who deliver them directly to the customers. These orders are updated inside purchase orders, purchase requisitions, and sales orders.
- Pipeline Handling: In pipeline handing, the material is not stored by the company; rather, it is stored by the vendor itself. The material is ordered from the vendor whenever it is required by the company.
- Stock Transport Order: When one plant requires some goods, it orders them from another plant of the organization. These goods are procured using the stock transport order. The transfer of goods can be monitored using this stock transport order. Prepare yourself for the Top SAP MM Interview Questions And AnswersNow!
Structure of an Organization In SAP MM Module
Understand the structure of an organization through this SAP MM tutorial.
An organization is formed of various levels and multiple units. These units follow a regular hierarchy. Each of these units has a special function that constitutes together to describe the structure of an organization.
- Company code
- Storage location
- Purchasing organization
- Purchasing group
Client: A client is a commercial unit that has its own master data consisting of independent table sets. It is at the top of the hierarchy in the SAP system. All organizational levels have access to all the data stored at the client level.
Company Code: A company code is the smallest unit in an organization that comes under the client level. It has an independent accounting unit that maintains its own profit, loss, and balance statement.
Plant: A unit within a company that is responsible for the production of goods and making them available for the company is known as a plant. A plant unit consists of a manufacturing facility and warehouse.
To define a plant, follow the below steps:
Step 1: Enter transaction code ‘SPRO’ in the command field and press Enter
Step 2: Follow the Menu Path
Step 3: Click on Define Plant
Step 4: Click on New Entries
Step 5: Enter the new plant code, update the name of the plant, and then press Enter
Step 6: Update the address of the plant and press Enter
Storage Location: A storage location is a unit within a company that is used to store material stocks and goods available in a plant. A plant can have multiple storage locations where all the data related to the storage location is stored.
Purchasing Organization: Purchasing organization is a unit within a company which is responsible for the procurement activities. Purchasing organization takes care of the external procurement as well.
When a purchasing organization unit is present at the client level, then it is called a centralized purchasing organization. A purchasing organization can also be present at the company level or at the plant level. In such situations, it is termed as a company-specific or plant-specific purchasing organization.
Purchasing Group: Purchasing group of an organization is a unit which is responsible to carry out day-to-day procurement activities of an organization. It is a group of purchasers who are responsible for procurement activities.
Learn about SAP R/3 in this SAP MM tutorial.
SAP R/3 is a software that was produced by the German corporation, SAP AG (now SAP SE). This software was developed to coordinate all resources and activities required for a business operation such as human resource management, order fulfillment, billing, and production planning.
SAP R/3 is used to store data in real time. Now, data stored in SAP R/3 is divided into two categories:
- Transactional data
- Master data
Transactional data is the data that is related to the processing of a business transaction. It is the data that is related to the payment made to vendors against their orders or the payment taken from a customer for the goods.
Master data is the main data that is used for any transaction within an organization. It is centrally stored in an organization and anyone can access it. But, the data needs to be updated on time.
SAP Master Data is of two types:
- Vendor Master Data
- Material Master Data
Vendor Master Data: Vendor master data is a collection of information about all vendors associated with an organization. It consists of information like a vendor’s name, age, address, type of material which he sells or buys, etc.
Vendor master data is divided into three categories:
- General data: The data which is kept at the client level and is valid for all organizational levels is called the general data.
- Accounting data: Accounting data is related to the expenses of the material procured or sold. All this data is maintained at the organizational level.
- Purchasing data: Purchasing data holds the data of the material or services that need to be procured from vendors or suppliers. The information related to purchasing data is maintained at the purchasing organization level.
Vendor Account Group
All vendors listed under an organization are categorized on the basis of their requirements. vendors having similar characteristics are grouped together under one single account which is called a vendor account group.
When a vendor master record is created, a unique number is allocated to that vendor to recognize it.
A vendor can be assigned the number in two ways:
- External number assignment: In this assignment, when you create a record for the vendor, you have to enter your own unique number which must consist of alphabets and digits.
- Internal number assignment: In this assignment, while creating a record for the vendor, a unique number is automatically generated by the system. These are described in more detail on SAP community.
Vendor Master Creation
Vendor master is used to storing a list of vendors from where a company can sell or procure goods.
Material Master Data: The material-specific data is stored using the material master data. The stored data consists of information regarding the materials that a company needs to procure, store, produce, or sell.
There are different departments in an organization. Each of the departments works on some particular material and they enter different information about their material. So, each department has its own view of the material master record.
Characteristics of Material Master Data:
All materials having common traits are assembled together and they are allocated to a material type. It helps differentiate the materials and manage them systematically.
E.g., the finished products and the raw materials can be grouped into corresponding material types.
A material group is an extended range of material types. Materials that have common attributes are selected together and assigned to a material group.
E.g., food products, electrical products, stationery, etc. are materials that can be grouped according to their types.
When a material master record is created, a unique number is allocated to every material to recognize it.
Material can be assigned the number in two ways:
External number assignment: In this assignment, when you create a record for material, you have to enter your own unique number which must consist of alphabets and digits.
Internal number assignment: In this assignment, while creating a record for a material, a unique number is automatically generated by the system.
Material Master Creation
Material Master is used to storing all the information about the materials that a company produces, sells, stores, or procures. It stores all the information at the central data which is available for every unit present at different levels.
MM flow in SAP using Procurement Cycle
This SAP MM tutorial will teach you about Procurement Cycle.
Every business organization requires materials or services to fulfill their business needs. The process of purchasing materials and services is known as procurement.
Different steps used to procure materials and services that form a MM flow in sap procurement cycle. The steps of MM flow in SAP are:
- Determining the requirement
- Purchase Requisition
- Generating the purchase order
- Generating goods receipt
- Generating the invoice
Lets look each steps of procurement lifecycle in detail:
- Determining the requirement: it is the first step in the procurement lifecycle. An organization determines the number of materials or services required. After the determination of the requirement, a list of items is created that is approved by the senior authority to procure.
- Purchase Requisition: An organization gathers all its requirements, and then a list of requirements is made that is given to the purchasing organization to procure the materials mentioned in the list.
- Generating the purchase order: After the approval, a purchase order is generated which is sent to the vendor to procure the required material. A purchase order holds information about the vendor’s name, address, and the date of delivery.
- Generating goods receipt: When the vendor processes the purchase order and delivers it to the concerned party, the process is termed as goods receipt. Then, the authority verifies the quality and condition of the delivered products. After verification of the material, the goods receipt is posted.
- Generating the invoice: The invoice is sent by the vendor to the organization. After receiving the invoice, it is verified by the organization. Now, to make payment to the vendors an account determination in SAP MM is configured that makes the system automatically generates the G/L account of the vendor that needs to be paid.
Physical Inventory Management In SAP MM Module
Learn all about Inventory management through this SAP MM tutorial.
Physical Inventory management under the SAP MM module manages the stock of goods in an organization. It deals with the procurement of goods according to their availability and stores the stock of goods within the organization premises. It is used to maintain records of goods and update them at regular intervals.
Some of the functions of physical inventory management are:
1. Movement management in SAP MM: Movement management keeps an eye on the goods which are ordered, stored, sold, or used, i.e., it manages goods receipt or goods issue.
2. Goods receipt in SAP MM: Goods receipt is the record of the material that is delivered by the vendor to the ordering party. Later, after the delivery, the quality and condition of the goods are checked and, after the verification of the material, the goods receipt is posted. Now, according to the movement type, the stock is updated in the inventory using the goods receipt. Goods receipt reflects the increase in warehouse stock.
3. Reservation in SAP MM: Reservation in SAP MM is blocking of some stocks so that it can be made available at a particular time. It ensures the availability of stock and can be seen by the t-code ‘MMBE’ using the material number and plant key/code.
4. Goods issue in SAP MM: Goods issue is the movement of stock out of the inventory system for using or sampling or returning it back to the vendor. Goods issue leads to a decrease in the amount of stock in the warehouse.
Conclusion of SAP MM Module
In this technology-driven world, the SAP MM module is in huge demand as all business organizations need the SAP MM module to manage their material in an efficient manner. SAP MM module helps organizations remain updated and run smoothly. Become Master of SAP material management by going through this online SAP MM Course.