SUBCONTRACTING PROCESS IN SAP MM

Subcontracting process in sap mm is a kind of special procurement where your company orders material from external vendor and provides components to the said vendor for production.

For example, if your company requires a product FG1112 , then for the production of the said product i.e. FG1112, company provide two raw materials RM11 and RM12 respectively to external vendor.

After production or rework your vendor will supply required material i.e. FG1112.

Subcontracting Process has following characteristics :

1. Purchase order for finished product raised which includes components to be provided for the subcontractor. You can add these components manually or through Bill of Material.
2. Components provided gets added in the stock as material provided to Vendor. You can check stock position vide transaction code MMBE.
3. Subcontractor (Vendor) supplies finished product . After this enter Goods Receipt for these products and consume components gets clear from stock.
4. In case of over or under consumption of the components provided to vendor, subsequent adjustment entry has to be made.

For  providing material to Vendor available stock types are unrestricted use and quality inspection i.e. we can supply material to the vendor from these stocks only.

A material can be provided to the vendor through Transfer Posting from unrestricted use stock to the stock of material provided to the vendor with a movement type 541 O.

When vendor supplies ordered material you can post Goods Receipt (T code MIGO). You can change component quantities manually if vendor informs about any excess or under consumption.

In case of such case,  we have to post Subsequent Adjustment to correct the consumed components.

Following is the process of Subcontracting :

Provide material to vendor (T code MB1A)

Select Movement Type as 541

Select your Vendor, Plant and put Components to be provided and save the record.

Create Purchase Order

Select L as Item category. Put your Finished product code, Quantity and save the record.

Click on Explode BOM and check your components.

Take Goods Receipt Note

SAP Reservation

SAP RESERVATION

A Reservation is request to the warehouse to hold the material in plant or storage location and keep material ready for goods issue at a later date.  Goods issue will be for certain purpose. For example, if a material is require for production activities, then we can create sap reservation for that particular material, for the purpose of production.

• Reservation ensures that material is available when it is require.
• Reservation for goods issue can be requested by various departments.
• It generally deals by MRP for quick procurement of material in case of urgent requirement and the product is not available in the plant.
• It is use to plan the material movement in advance.

SAP Reservation includes all the related information regarding the material, quantity, requirement date, plant name or code, customer details.

Reservation document consists of header and item. It includes data about reservation such as movement type, account assignment etc. and item data describe individual planned movements like material, quantity, requirement date etc.

SAP reservation is made at plant or storage location level and can also be handle at the batch level.

We can create Reservations either manually or automatically.

• Manual reservations can be entered by users
• Automatic reservations by the system automatically. Examples of automatic reservations are reservations for orders, WBS , stock transfer reservations etc.

Automatically created reservations cannot be changed In case to change the reservation we have to change original production order.

SAP RESERVATION

When we create SAP Reservation  :

• System creates reservation document.
• Inventory position remains unchanged for total stock and unrestricted use stock.
• Reserved stock get increase by the quantity of reservation
• In materials requirement planning, the available stock gets reduce by the reserved quantity.

After we create SAP Reservation, we can view reserve quantity by applying transaction for stock overview MMBE. Here system will display the reserved quantity for the material. Unrestricted stock quantity will be unaffected and reserved stock is part of the unrestricted stock.

As SAP Reservation is plan movement, a reservation cannot be in the past. Also before creating reservation, we should decide movement first because the movement type cannot be change once we create a reservation.

Following are the steps for creating reservation :

1. SPRO -> IMG -> MM -> INVENTORY MANAGEMENT AND PHYSICAL INVENTORY -> NUMBER ASSIGNMENT -> DEFINE NUMBER ASSIGNMENT FOR RESERVATION

Click on Intervals. Observe intervals available and take back. Now click on No. Range res/dep.rq and observe number range assigned over here. Take back to IMG.

2. SPRO –> IMG –> MM –> INVENTORY MANAGEMENT AND PHYSICAL INVENTORY –> RESERVATION –>DEFINE DEFAULT VALUES –> SET DYNAMIC AVAILABILITY CHECK

Click on Movement Type

3. CREATE MATERIAL MASTER (MM01)

In MRP1 view select MRP Type as VB. Put Reorder Point as 100 qty e.g.In MRP3 View put availability check as 01 ,put other details and save the record.

4. Add inventory in newly created Material (T code MIGO)

Select Movement Type 501. For practice take 50 inward quantity.

5. SAP MENU –> LOGISTICS –> INVENTORY MANAGEMENT –> RESERVATION –> CREATE

Base date is material require date. Give movement type as 201 and plant and press enter.

Give details like cost center, material quantity, plant and storage location save the record.

For further understanding, you can visit SAP Documentation of Reservation.

SAP MM VENDOR CONSIGNMENT PROCUREMENT PROCESS

In this post, we will learn about SAP MM Vendor Consignment Procurement Process.

Vendor consignment is a process where supplier (vendor) provides material to purchaser and stores in the premises of the purchaser itself.  Ownership of that material lies in the hands of supplier although it is stored in purchasers premise.

In other words, we can say that the material remains in the books of the vendor until withdrawn from consignment stock.  Inventory in the hands of purchaser gets affected only when the stock gets transferred.

The supplier would not raise invoice initially, a purchaser will only pay after the consumption.

We can derive following points for Vendor consignment process in sap mm :

• Consignment process in SAP MM is functionality in Materials Management Purchasing when organization purchases material from the vendor on consignment.
• This process is include in special procurement type in SAP.
• We will provide our space to Vendor to store the material, however, we are not responsible for stock.
• Ownership and liability of stock remain in the hands of the vendor.
• Consignment material number is same as in the books of purchaser’s unrestricted stock.
• Consignment stock is maintained as individual supplier or vendor level as there can be multiple parties for procurement.
• Purchasing Info Record is mandatory to maintain for this process. Price of the consignment is also maintain in Info Record. We have to create the record with Consignment as a category.
• Goods Receipt against consignment Purchase Order is Non-Valuated.
• Goods Receipt happens at the price mentioned in Info Record.
• After making Goods Receipt, stock still shows as Vendor Consignment stock.
• When we require the material, we transfer quantity from vendor consignment stock to our own stock.
• We will pay only for such transferred quantity.
• The vendor need not send invoice or bill for the withdrawal quantity. An organization will settle the consignment liability.

STEPS OF  CONSIGNMENT PROCESS IN SAP MM

CONSIGNMENT INFO RECORD

T code ME11

Select Consignment. Put your Vendor, Material, Purchasing Organization and Plant.

Put details like Net Price, Tax Code. and then save the record.

CREATE PURCHASE ORDER

Give details like Vendor, Quantity, Plant and mainly select item category as K for consignment. Enter your Organizational Data.

Save the record.

GOODS RECEIPT NOTE ( T CODE MIGO)

Here put Purchase Order Number.

Click on Check button and tick on Item OK and Post the document.

TRANSFER POSTING ( T CODE MIGO)

Select Movement Type as 411 K.  In this step, we will transfer vendor consignment stock to our unrestricted stock. Then Post the document.

CONSIGNMENT SETTLEMENT (T CODE MRKO)

In this step, we will settle consignment liability

ick on Consignment and select Settle in Processing, then Execute. Consignment liability is settle.

FacebookTwitterWhatsAppPinterestShare0

PHYSICAL INVENTORY PROCESS IN SAP MM

Physical  inventory process involves accurate physical count of material in the plant or warehouse for inventoried stock.  Following type of stocks can be inventoried :

• Special stock ( Returnable packaging material stock, consignment stock etc.)
• Organization’s own inventory

Physical inventory is carry out in warehouse on a regular basis. Inventory of the following stock types has to be taken at time of physical count. It is undertaken at storage location level and system generate separate document for each storage location. For physical inventory process maintaining storage location is mandatory. Since storage location data is active we can take physical inventory.

• Unrestricted Stock
• Blocked Stock
• Quality Inspection Stock

Following are the types of physical inventory :

• Periodic Inventory
• Cycle Counting
• Inventory Sampling
• Continuous Inventory

Cycle counting for physical inventory is carried out by following A,B,C, and D principles.

PERIODIC INVENTORY

• A physical count of the entire stock.
• During counting material movements in the plant or warehouse should be block. i.e. movement of inventory is not allow when physical inventory counting is going on.
• Proper counting of every product or material is require.

CYCLE COUNTING

• Continuous inventory count during the year at regular intervals.
• Cycle counting indicator is set for physical count of the material

INVENTORY SAMPLING

• Random selection of stock for physical counting
• For the minor differences in physical and book inventory which is within tolerances, company treat stock balance as correct, which depends on the policy of the said company.

CONTINUOUS INVENTORY

• In this method, stock count is continuous during the year.
• Counting of every material atleast once in a year.

There are three phrases of physical inventory process as shown in the above image :

1. Physical Inventory Preparation

• Creation of physical inventory document.
• Distributing inventory document.
• Inventory  blocking for movement during physical count.

2. PHYSICAL INVENTORY COUNT

• Physical counting of inventory takes place and counting results are enter in the sheet.
• In the option of enter physical inventory count, all these findings are enter into system.

3. PHYSICAL INVENTORY CHECK

• After entering of inventory count in the system, we can check check variances in the stock through list of inventory differences.
• Re count option is also available if the physical count is incorrect.
• The system posts the difference and adjusts book stock accordingly.
• After posting, the system generates accounting documents.

A, B, C AND D INDICATOR FOR CYCLE COUNT

Cycle counting in SAP is a very important process as far as physical inventory is concerned. For cycle count of materials, every material has not of equally important.

Some materials require frequent count and some are require to be count rarely. Products with more consumption are classified as A and with low consumption, a value is classified as D.

As a result, items with A indicator will count frequently and D will be less frequent.

For daily cycle count, A products and B products can be selected with only some items of C and D indicator.

Transaction code for this process is OMCO

• NO.OF PHYSICAL INVENTORIES IN FISCAL YEAR

For plant 1000, these figures are A-12, B-6, C-3, and D-1 respectively. This indicates how often in a fiscal year physical inventory count has to be carry out for the purpose of cycle count.

• INTERVAL FOR CYCLE COUNTING

For plant 1000, and for A category no.of, physical inventory count is 12 per year, for factory calendar 240 days. Interval will be calculate as 240/12 = 12 days. It indicates after how many workdays another cycle count for the inventory to be schedule.

• FLOAT TIME

It indicates a number of work days by which cycle count may vary.

For example Plant 1000 floating time is 5 days. Physical inventory count is scheduled for B category material on 10th March. On expiration of flat time (i.e. after 20 march – float time is 10 days for B category) if the physical count has not been carried out, then irrespective of material category material is parked for the coming next cycle count run.

• PERCENTAGE

It specifies the percentage allocation of a material to the category. For example, in plant 1000, there are 200 products for cycle count. As we can see in the image percentage allocation for A-56, B-28, C-14, and  D-2 respectively which equals to 100.

For the purpose of analysis which is base on the criteria of consumption, cycle counting indicator is assign as :

First 3 materials represent 50% of the consumption have indicator A

Next 12 materials represent 25% of the consumption have indicator B

Next 49 materials represent 15% of the consumption have indicator C

Remaining material represent 10% of the consumption have indicator D

For cycle counting in sap, in Material Master storage data, we have to maintain cycle counting indicator of the material which we want to include in cycle counting. There are two ways to do this :

1. Manually at the time of material creation (MM01) or change the material master (MM02)
2. Automatically using ABC analysis.

In case you have any questions regarding Cycle Counting In SAP ( A, B, C, D indicator) feel free to comment.

SAP CONTRACT

In this post, we will learn about SAP Contract.

A contract can be created without reference to a Purchase Requisition, Outline Agreement requisition, RFQ or another contract.

For SAP Contract, you can use various item categories. Document field control depends on item category.

At the time of creating the material master record, you have to maintain purchasing and accounting data if contract item is a stock material item.

If it is for a consumption, account assignment data may already store in the contract or we can use account assignment category U, which means that account assignment data is use for the first time in contract release order.

Release documentation for contract item get updated for each purchase order item, which is then created with reference to a contract.

For release order, the system provides the following data :

1. The number of the PO and the relevant item
2.  Order data
3.  Quantity of order 
4.  Value of  order 

Release documentation includes quantity or value released and target quantity in comparison with the still open quantity, or the target value in comparison with the still open value.

Release document updation is based on agreement type. Agreement type decides release is with reference to the target value or the target quantity of the contract.

CENTRALLY AGREED CONTRACT

In a company where the central purchasing organization is in operation for all purchasing activities which cover several plants and not just one particular Plant a centrally agreed contract can be used. Here option of creating contracts are for purchasing organization.

All plants are assigned to Purchasing Organization and Plant is not specified until the contract release order is created.  For all assigned plants you can release contract.

As against in case of plant-specific contracts, you can create different conditions for partners for individual plants.

You can specify separate conditions for each receiving plant.

CONTRACTS FOR  MATERIAL GROUP

M (material unknown) and W (material group) are contract specific item categories that represent contractual agreements for a material group where you can enter contract items without material master specification.

Item category M

It is use for similar attributes materials that have the same price. It can have different material numbers or material without master records.

Item category W

It was recommended for the material of the same group but with different prices. This item category can only be use in value contracts.

There are three types of contract :

QUANTITY CONTRACT

 In quantity contract, the total quantity of each item to be order for the contract period is available. After entering validity period, you must enter target quantity at an item level. In this type of contract, when a stipulated target quantity per contract item reaches, contract gets fulfill.

VALUE CONTRACT

In value contract, the total value of all release order issued against contract is not to exceed a certain amount. You have to mention the target value in the header data of the contract in addition to the validity period. You can also enter the target quantities of the material.   The contract gets fulfill after overall target value reaches.

DISTRIBUTED CONTRACTS

Distributed contracts are centrally agreed contracts. You can create a contract in one SAP system, then make it available to other independent SAP systems. It means the contract would get distribute to other systems. All SAP systems are independent and the data we must be keep identical to each individual system. Data will exchange via Application Link Enabling (ALE) for continuous comparing and reconciliation for changes.

Following are the steps to create SAP Contract :

Step 1 : Create Contract

SAP Menu Path   : SAP Menu > Logistics > Materials Management > Purchasing > Outline Agreement > Contract > Create

Transaction code :  ME31K

In this post, we will create Value Contract

Select Agreement Type as WK for Value Contract.

Enter Validity Start and End date as well as Target Value. Press Enter.

Enter Material and other details like plant. No need to enter quantity as this is a value contract. Save the record.

Step : 2 Create Purchase Order

SAP Menu Path    : SAP Menu > Logistics > Materials Management > Purchasing > Purchase Order > Create > Vendor / Supplying Plant Known

Transaction code : ME21N

You can create Purchase Order with reference to  Contract.

Do you like this SAP MM Tutorial? Have any Questions or Comments? We would love to hear your feedback in the comment section below. It will be a big help for us, in the improvement of our free SAP MM Tutorials.

PURCHASING INFO RECORD IN SAP MM

SAP purchase info record is a source of information to the purchasing department. It contains data on a certain material and the supplier of that particular material.

It provides information about which vendors can supply which material at what price. At the time of creating Purchase Order, the system takes this information as a default.

SAP purchase info record contains information such as:

• Delivery options
• The material number of vendor
• Current price and other price structure
• Last purchase order number
• Price control indicator
• Planned delivery time of vendor for the particular material
• A tolerance limit for under or over deliveries.   

SAP purchase info record can be :

• Info record with material master record
• Info record without the material master record

TYPES OF INFO RECORDS

There are four types of SAP purchase info records:

1. Standard: It is used for creating a standard purchase order, for material or service i.e. with or without material master record.
2. Subcontracting: It is use for creating of a subcontract purchase order. Subcontracting is a process where the company provides raw material to the vendor for rework or assembly. After the require work, vendor return finished product.
3. Pipeline: It contains information regarding the procurement via pipeline. For example, water or gas procure through the pipeline.
4. Consignment: Consignment is a process where vendor stores or keep material at company premises. Ownership or liability of the said material lies with the vendor. When the company creates consignment purchase order when it requires any quantity of such stock. In such case, info record contains the price that is to pay for withdrawing material from consignment stock.

HOW TO CREATE  SAP PURCHASE INFO RECORD

To create Purchasing Info Record enter ME11 in command prompt.

1. Enter ME11 transaction code in command prompt.
2. Enter your vendor and material. You can enter Purchasing org. and/ or plant.
3. Choose Info Category as per requirement.

Press Enter to proceed to the next screen.

1.  Reminder 1,2,3:

• Represents time interval in the number of days at which reminders are to be issued to the vendor. Values which are mention over here are default in purchasing documents.

2. Vendor Mat.No./ Subrange and VSR Sort No.: 

• Vendor Material Number field is used in case vendor uses the different number for the particular material that which is use by company, for identification purpose, this number is mention in a Purchase Order.
• Vendor Sub- range is use to sub divide vendor product into different ranges.
• VSR Sort No. is use in Purchase Order as a default value for the order items number.

3. Vendor Mat Grp/ Points:

• Material group use by the vendor for the particular material.
• If vendor grant points, which can be use for subsequent settlement, you can enter that here.

4.  Salesperson/ Telephone:

• Name of salesperson
• Contact of salesperson or representative

5 Return Agmt/ Prior Vendor:

• Return agreement specifies the agreement between the client and the vendor for the return of the material.
• The prior vendor is a vendor who is one step back in the supply chain from your vendor. Generally, prior vendor is a manufacturer of the material.

6 Order Unit/ Conversion/ Var order unit:

• Order unit is the unit of measure in which material is order. This order unit is defaulted from the material master record and adopted in all purchase orders for this material and from this vendor.
• Conversion is useful when the base unit of material differs from the order unit.
• Variable Order unit is use when material can be order in more than one unit of measure enter 1 in this field.

7 Certif. Cat:

• Type of certificate issued to the vendor.

8 Certificate/ Valid To

• Here you can mention certificate number issued in the country of origin.
• You can mention the date until which the certificate of origin is valid.

9 City of Origin/ Region/ Number/ Manufacturer

• You can enter the city of origin and region.
• In Number field, you can enter customs tariff number.
• In the Manufacturer field, you can mention the name of the manufacturer fo the material.  The system will adopt this name in the purchase order.

10 Available From/ To

• If this vendor can supply the material only during the specific period, specify the date over here.

11 Regular Vendor

•  This indicator can be set for only one info record for each material.

After entering all the details, you can enter Pur Org. Data 1 button to enter data relevant to a Purchase Organization.

1.Pl Deliv. Time:

•  The number of calendar days needed to obtain the material or service.

2.  Purch. Group:

• Group of persons for that particular material procurement activities.

3. Standard Qty:

• A quantity of the material that is normally order from this vendor.

     Minimum Quantity:

• The smallest quantity of the material that can be order.

5. Shipping instr.:

• Specifies the packaging and shipping instructions issued to the vendor.

7.  Tol Underdl:

• Percentage (based on the order quantity) up to which an under-delivery of this item will be accepted.

8. Tol. Overdl:

• Percentage (based on the order quantity) up to which an over the delivery of this item will be accepted.

9. No M text:

• Specifies whether the info record PO text is to be copied into the purchasing document item.

10.  Conf. Ctrl:

• It Determines which confirmation categories are expected for a PO item. For example order acknowledgment.

13. Procedure:

• It specifies a standard, 5-digit code that uniquely identifies an export/import procedure.

14. Rndg. Prof.:

• It is a key that the system uses to adjust the order proposal quantity to deliverable units.

15. UoM Group:

• Key that you can use for grouping several units of measure.

16. Net Price:

• Price arrived at after taking all discounts and surcharges into account.

18. Incoterms:

• Commonly-used trading terms that comply with the standards established by the International Chamber of Commerce (ICC).

19. No Cash Disc:

• Indicates whether a cash discount is granted with regard to the item.

20. Cond. Grp:

• Condition group to which the material belongs with the vendor.

Press Conditions tab.

In conditions screen, we have to maintain pricing conditions. The price which we have enter at previous screen get copy to this screen.

1. Valid From: Enter from date

2. Valid To: Enter validity to period. In the above screen, our condition is valid for the period 15.07.2018 to 31.12.9999 (infinite future validity).

3.  Condition Type: Enter requires condition type in this field. PB00 is default condition type.

4. Amount Per Unit: Enter amount and amount unit. (e.g. 120 EUR). Quantity for which amount to be pay and unit of measure.

Then click on Text button.

1.  Info Record Note: You can enter info record note, tick on the checkbox of info record note to active it.

2 Purchase Order Text:  It will get copy to Purchase Order.

After you enter all the data and desired information about material/vendor combination save your record. The system will display your Info Record Number. It can be use for future reference to edit or display the record.