MM Component Short Description - Jessemerin.com · Materials Management December 1999 7 Materials Management Definition With the Purchasing System, requirements of materials or services

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MM Component Short Description SAP AG

2 December 1999

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December 1999 3

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4 December 1999

Contents

MM Component Short Description ....................................................................6Materials Management .................................................................................................................. 7Consumption-Based Planning ..................................................................................................... 8

Processing Planned Orders (See PP MRP)............................................................................... 9Purchasing ................................................................................................................................... 10

Basic Functions ........................................................................................................................ 11Intra-European Import and Export....................................................................................... 12Taxes................................................................................................................................... 13Confirmation Control/Shipping Notification ......................................................................... 14Release (Approval).............................................................................................................. 15

Release of RFQ/Quotation............................................................................................. 16Release of Requisitions ................................................................................................. 17Release of Outline Agreements ..................................................................................... 18Release of Purchase Orders.......................................................................................... 19

Vendor-Material Relationships and Conditions ........................................................................ 20Info Record.......................................................................................................................... 21Subsequent Settlement ....................................................................................................... 22Conditions ........................................................................................................................... 23

Sources of Supply .................................................................................................................... 24Quota Arrangement............................................................................................................. 25Source List .......................................................................................................................... 26

RFQ/Quotation ......................................................................................................................... 27Outline Purchase Agreements with Vendors............................................................................ 28

Contract ............................................................................................................................... 29Scheduling Agreement ........................................................................................................ 30

Purchase Requisitions.............................................................................................................. 31Purchase Orders ...................................................................................................................... 32

External Services Management.................................................................................................. 33Inventory Management................................................................................................................ 34

Basic Functions ........................................................................................................................ 35Data Transfer ...................................................................................................................... 36Data Transfer: Stocks ......................................................................................................... 37Data Transfer: Reservations ............................................................................................... 38Data Transfer: Physical Inventory ....................................................................................... 39

Goods Receipt.......................................................................................................................... 40Goods Issue and Return Delivery ............................................................................................ 41Stock Transfer/Transfer Posting............................................................................................... 42Reservations............................................................................................................................. 43Physical Inventory .................................................................................................................... 44Balance Sheet Valuation Procedures....................................................................................... 45

Warehouse Management ............................................................................................................ 46Master Data .............................................................................................................................. 47Warehouse Movements............................................................................................................ 48Inventory at the Storage Bin Level ........................................................................................... 49


December 1999 5

Storage Unit Management ....................................................................................................... 50Interfaces.................................................................................................................................. 51Decentralized Warehouse Management .................................................................................. 52Other Functions ........................................................................................................................ 53

Invoice Verification...................................................................................................................... 54Basic Functions ........................................................................................................................ 55

Preliminary Posting ............................................................................................................. 56Incoming Invoices..................................................................................................................... 57Material Price Changes ............................................................................................................ 58G/L Clearing Account Maintenance.......................................................................................... 59

Information System ..................................................................................................................... 60Purchasing Information System ............................................................................................... 61

Reporting............................................................................................................................. 62Planning............................................................................................................................... 63Data Collection .................................................................................................................... 64Logistics Information Library ............................................................................................... 65Early Warning System......................................................................................................... 66

Inventory Controlling................................................................................................................. 67Reporting............................................................................................................................. 68Planning............................................................................................................................... 69Data Collection .................................................................................................................... 70Logistics Information Library ............................................................................................... 71Early Warning System......................................................................................................... 72

Vendor Evaluation .................................................................................................................... 73Electronic Data Interchange ....................................................................................................... 74

Outbound Message Processing ............................................................................................... 75Inbound Message Processing .................................................................................................. 76


MM Component Short Description

6 December 1999

MM Component Short Description


Materials Management

December 1999 7

Materials ManagementDefinitionWith the Purchasing System, requirements of materials or services determined in thedepartments or by the materials planning and control system can be converted into purchaseorders or releases against longer-term purchase agreements almost completely automatically.

The buyer only has to intervene in exceptional cases.

Sources of supply for requirements can be found automatically. If none are available, RFQs arecreated, quotations solicited and compared, and suitable vendors selected.

The vendor evaluation facility supports the vendor selection process.

Numerous analyses are available to support purchase order follow-up activities.

Purchasing, Inventory Management, Invoice Verification, and user departments have commonaccess to procurement data, which saves time and effort in the creation and processing ofdocuments.


Consumption-Based Planning

8 December 1999

Consumption-Based PlanningDefinitionProcedure within materials planning that is based on existing warehouse stock and historicalconsumption data. Consumption-based planning can be subdivided into the followingprocedures:

• reorder point planning

• forecast-based planning

• time-phased planning

Consumption-based planning procedures are straight forward materials planning procedures withwhich you can achieve set targets with relatively little effort. These planning procedures areusually used in areas without in-house production and/or in production plants for planning both B-and C-parts and operating supplies.


Processing Planned Orders (See PP MRP)

December 1999 9

Processing Planned Orders (See PP MRP)DefinitionPlanned orders contain material requirements that are calculated automatically in the planningrun or that are created manually by the MRP controller. Planned orders are converted intoproduction orders for materials produced in-house and into purchase requisitions for materialsprocured externally.

Planned orders are required for the creation of dependent requirements.

If materials are procured externally only, it is also possible to work without planned orders. In thiscase, purchase requisitions are directly created for the purchasing department.


Purchasing

10 December 1999

PurchasingDefinitionThe “Purchasing” component covers the following tasks within Materials Management (MM):

• External procurement of materials and services

• Determination of possible sources of supply to cover a requirement

• Monitoring of goods receipts and payment for same


Basic Functions

December 1999 11

Basic FunctionsDefinitionGlobal functions designed for Invoice Verification.


Intra-European Import and Export

12 December 1999

Intra-European Import and ExportDefinitionSupport in the generation of declarations concerning imports within the European Community(EC), which have to be forwarded to the responsible national authorities (in the UK, for example,the Tariff and Statistical Office of HM Customs and Excise, or in Germany the Federal StatisticalOffice), and the determination of customs tariff preferences.

Selection criteriaSelection is necessary if the Intrastat declaration is to be used or customs tariff preferences areto be determined by the system.

The relevant data for the declaration can be selected and the declaration can be outputted eitherdirectly on an Intrastat form supplied by the statistical office (paper version) or onto a data carrier.

Customs tariff preferences (preferential tariffs) are an important means of promoting exports,based on agreements made between different groups of countries. As a result, importers ofgoods to which the agreement applies pay either no or lower import duties.


Taxes

December 1999 13

TaxesDefinitionFacility for the automatic determination of tax codes using the conditions technique.

Selection criteriaIf you choose to use this component, you can have the tax code determined automatically duringthe price determination process. The tax code is normally defaulted from the purchasing inforecord for PO items. This makes sense, for example, if different tax rates apply depending onwhether a material is initially placed in storage or consumed immediately.


Confirmation Control/Shipping Notification

14 December 1999

Confirmation Control/Shipping NotificationDefinitionIn MM Purchasing, a confirmation is a communication from a vendor to the recipient concerningthe anticipated arrival of ordered materials. The term covers various types of documentcontaining information from the vendor, such as order acknowledgments, loading or transportconfirmations, and shipping notifications.

Selection criteriaIf you choose to use this component, you can have your vendor confirm delivery dates andquantities subsequent to the issue of a purchase order, so as to provide you with more up-to-dateinformation (for materials planning and control purposes) than that contained in the PO.


Release (Approval)

December 1999 15

Release (Approval)DefinitionImplementation of clearance (or approval) strategies for purchasing documents, making thefurther processing of the latter subject to the fulfillment of certain prerequisites.

Selection criteria• Release procedure 1:

Applicable to purchase requisitions only. Individual items of a requisition can be releasedfor the creation and issue of RFQs or purchase orders.This procedure serves as a correction and approval procedure for purchase requisitions.Its aim is to check the data on material, quantity, and dates for accuracy and ensure thecorrectness of the specified account assignment and source of supply.

• Release procedure 2:

Applicable to all purchasing documents (RFQ, purchase order, requisition, contract,scheduling agreement, service entry sheet). This procedure uses classification functionsallowing the specification of a large number of release conditions and the flexibledefinition of release strategies.The aim of this procedure is to replace manual written authorization procedures usingsignatures by an electronic one, while maintaining the dual control principle.


Release of RFQ/Quotation

16 December 1999

Release of RFQ/QuotationDefinitionRelease procedure using MM Classification for the control of RFQ processing.

Selection criteriaIf you choose to use this component, you can replace manual written authorization proceduresusing signatures by an electronic one, while maintaining the dual control principle. The personresponsible processes the relevant document in the system, thereby marking it with an“electronic signature” which can give the document legal force.


Release of Requisitions

December 1999 17

Release of RequisitionsDefinitionRelease procedure using MM Classification for the control of requisition processing.

Selection criteriaIf you choose to use this component, you can control requisition processing via two differentprocedures:

• Release procedure 1:

Individual items of a requisition can be released for the creation and issue of RFQs orpurchase orders.This procedure serves as a correction and approval procedure for purchase requisitions.Its aim is to check the data on material, quantity, and dates for accuracy and ensure thecorrectness of the specified account assignment and source of supply.

• Release procedure 2 using MM Classification:

The aim of this procedure is to replace manual written authorization procedures usingsignatures by an electronic one, while maintaining the dual control principle.


Release of Outline Agreements

18 December 1999

Release of Outline AgreementsDefinitionRelease procedure using MM Classification for the control of outline agreement processing.

Selection criteriaIf you choose to use this component, you can replace manual written authorization proceduresusing signatures by an electronic one, while maintaining the dual control principle. The personresponsible processes the relevant purchasing document in the system, thereby marking it withan “electronic signature” which can give the document legal force.


Release of Purchase Orders

December 1999 19

Release of Purchase OrdersDefinitionRelease procedure using MM Classification for the control of purchase order processing.

Selection criteriaIf you choose to use this component, you can replace manual written authorization proceduresusing signatures by an electronic one, while maintaining the dual control principle. The personresponsible processes the relevant purchasing document in the system, thereby marking it withan “electronic signature” which can give the document legal force.


Vendor-Material Relationships and Conditions

20 December 1999

Vendor-Material Relationships and ConditionsDefinition"Vendor-material relationships" document existing purchasing relationships with regard to certainmaterials. “Conditions” can be used to represent factors influencing the price determinationprocess for a material.


Info Record

December 1999 21

Info RecordDefinitionShort for “(purchasing) information data record”. Provides concise information on a vendor and amaterial that you already procure from the former. The info record thus represents a vendor-material relationship.

The purchasing info record permits the purchasing department to obtain data such as thefollowing:

• which materials has a certain vendor submitted quotations for or supplied to date?

• which vendors have quoted prices for or supplied a certain material?


Subsequent Settlement

22 December 1999

Subsequent SettlementDefinitionCalculation of and accounting for the amount due with regard to conditions requiring settlementnot at the time of payment of individual vendor invoices but at a later date - at the end of a certainperiod, as a basis for payment by the debtor to the creditor.

Selection criteriaSelection is necessary if any arrangements have been entered into with vendors concerning, forexample

• retrospective, volume-based incentive rebates,

• the purchase of certain quantities of goods,

• the early payment of invoices,

• the carrying-out of promotions

• contributions towards covering certain costs incurred by retailers

which require once-only or periodic subsequent (end-of-period) settlement.


Conditions

December 1999 23

ConditionsDefinitionRepresent terms of payment negotiated with a vendor. Conditions determine how the netpurchase price of a material is calculated by the system.

Conditions can be used, for example, to represent the following:

• Duties,

• Delivery costs (freight costs),

• Discounts,

• Price/quantity scales (discounts that vary according to the purchase quantity),

• Surcharges,

• Provisions (e.g. provisions to cover a tax liability likely to be incurred in a later period),and

• Taxes.


Sources of Supply

24 December 1999

Sources of SupplyDefinitionPossible suppliers of a certain material.

Selection criteriaSelection is necessary if you wish to employ additional functions such as the source list or quotaarrangement in support of the source determination process in addition to the functions forchecking current outline agreements and data on existing purchasing relationships.

In determining possible sources for a requested material, the system makes use of certaininformation to

• find the source automatically and assign it to the requisition, or

• present the user with a list of suggested possible sources.


Quota Arrangement

December 1999 25

Quota ArrangementDefinitionIf a certain material is to be procured alternately from different sources of supply over a period oftime, the individual sources can be allocated quotas. The quota indicates which share of the totalrequirement over the period is to be procured from which source.

Selection criteriaSelection is necessary if the total requirement of a certain material arising over a period of time isto be automatically apportioned among different sources.


Source List

26 December 1999

Source ListDefinitionContains the allowed/non-allowed sources of supply for a material in a plant relevant to apredefined time period.

Selection criteriaIf you choose to use this component, you can administer the allowed/non-allowed sources for amaterial jointly.

The purpose of the source list is to facilitate adherence to purchase agreements and theavoidance of errors in Purchasing where several vendors exist for a specific material. It alsoallows certain vendors to be blocked for any chosen period of time (e.g. in the case of deliveryproblems).


RFQ/Quotation

December 1999 27

RFQ/QuotationDefinitionThe request for quotation (RFQ) is an invitation to a specific vendor (external supplier) to submita quotation (bid) with regard to the supply of a certain item or the rendering of services orperformance of work.

The quotation is a vendor’s declaration of willingness to supply goods or materials or provideservices. It contains the vendor's prices and conditions for doing so and is usually submitted inresponse to an RFQ.

Selection criteriaIf you choose to use this component, you can administer and compare RFQs sent to - andquotations received from - vendors.

In Purchasing, the RFQ and the quotation are one and the same document. A vendor’s pricesand conditions are recorded in the original RFQ. In addition, the most favorable quotationsubmitted in response to an RFQ sent to several vendors can be determined automatically.Rejection letters can then be sent to unsuccessful bidders.


Outline Purchase Agreements with Vendors

28 December 1999

Outline Purchase Agreements with VendorsDefinitionLonger-term arrangements with vendors (external suppliers) concerning the supply of materialsor the rendering of services subject to specified conditions. The latter apply for a defined periodof time and to a defined total quantity or a certain total value of goods/services to be supplied.The date on which a delivery of materials is to be effected (or work is to be performed or servicesrendered) must be specified in a separate process.

Selection criteriaSelection is necessary if you wish to work with contracts and/or scheduling agreements.


Contract

December 1999 29

ContractDefinitionLonger-term purchase agreement with a vendor. The contract does not contain specific deliverydates or the individual delivery quantities. These are specified subsequently (at the time theconcrete requirement arises) in release orders issued against the contract.

Selection criteriaIf you choose to use this component, you can administer longer-term purchase agreements witha vendor in the form of quantity contracts (with a defined total purchase quantity) or valuecontracts (with a certain total purchase value).


Scheduling Agreement

30 December 1999

Scheduling AgreementDefinitionLonger-term purchase agreement with a vendor involving the subsequent creation and regularupdating of schedules for the delivery of materials. The schedules are made up of individualschedule lines indicating quantities and precise delivery dates.

Selection criteriaIf you choose to use this component, you can administer longer-term purchase agreements witha vendor with precise time schedules for the delivery of materials.

Since the vendor is not required to provide the total order quantity set out in the schedulingagreement in a single delivery, but can supply smaller “parcels” of the materials over a longerperiod according to the delivery schedule, the vendor’s lead times for individual deliveries can bereduced. Furthermore, by specifying exact delivery time-spots you can implement a Just-in-Time(JIT) delivery policy.


Purchase Requisitions

December 1999 31

Purchase RequisitionsDefinitionInternal document defining a requirement of a material or service. The purchase requisitionrepresents a request or instruction to Purchasing to procure a certain quantity of a material or aservice on or by a certain date.

A purchase requisition can be generated in different ways:

• Ιndirectly:

− via the materials planning and control system

− from requisitions (“need” notes) originating in other departments (e.g. Sales andDistribution, Project Management, Plant Maintenance)

• Directly, through manual entry in Purchasing


Purchase Orders

32 December 1999

Purchase OrdersDefinitionRequest or instruction to a vendor (external supplier) to supply certain materials orrender/perform certain services/works, formalizing a purchase transaction.

Among other things, the purchase order (PO) contains data on quantities, prices, delivery dates,terms of delivery, and terms of payment. It also specifies whether the material being ordered isinitially to be taken into stock or consumed immediately. The purchase order serves as the basisfor processing goods receipts and for invoice verification.


External Services Management

December 1999 33

External Services ManagementDefinitionProcess of procuring intangible goods, which are characterized by the fact that their productionand consumption, or usage, occur virtually simultaneously. Services are generally non-transferrable, non-storable and non- transportable.(Examples: building/construction works,cleaning services, legal services.)

The procurement of services is completely integrated within MM Purchasing. Servicespecifications are created within the purchasing documents. The requirement for a service istransmitted to Purchasing either automatically - via requisitions from PM (Plant Maintenance) andPS (Project System) - or manually.

You can procure services whose nature and scope are exactly known at the time of the purchaseorder (planned services), and those that need not be specified precisely until they are actuallyperformed (unplanned services). The use of value limits facilitates the budgetary control ofunplanned services.

Services that have actually been performed are recorded in service entry sheets and - ifadjudged to be satisfactory - subsequently accepted. Like all purchasing documents, serviceentry sheets can be subject to a release procedure. Accepted entry sheets constitute the basisfor invoice verification.

Selection criteriaIf you choose to use this component, you can reproduce the entire process of external servicesprocurement, from the bid invitation phase (using sets of service specifications), through theaward of contract/placement of PO phase, to the acceptance of the work actually performed.


Inventory Management

34 December 1999

Inventory ManagementDefinitionRepresentation of current physical stocks based on the real-time entry of all transactionsaffecting such stocks and the resulting updating of stock data.

Inventory Management includes the following transactions:

• managing stocks of materials on both a quantity and a value basis

• planning, entering, and documenting all stock movements (goods receipts, goods issues,stock transfers, transfer postings)

• physical inventory (stocktaking)

• balance sheet valuation


Basic Functions

December 1999 35

Basic FunctionsDefinitionGlobal Purchasing functions.


Data Transfer

36 December 1999

Data TransferDefinitionProcess of moving data into the SAP System. This can be performed automatically or manually.

The data transfer interface can be used both during the phase of installation (once-only process;for example, transfer of previously existing stock data into the SAP System) and during normalsystem operation (periodically; for example, as an interface to external systems).


Data Transfer: Stocks

December 1999 37

Data Transfer: StocksDefinitionProcess of moving stock data into the SAP System. This can be performed automatically ormanually. There is no direct transfer of stock data. Instead, goods movements are postedthrough the interface, thus updating stock levels.

Selection criteriaSelection is necessary if you require an interface for transferring stock data either during theinstallation phase (once-only process; for example, transfer of previously existing stock data intothe SAP System) or during normal system operation (periodically; for example, as an interface toexternal systems).


Data Transfer: Reservations

38 December 1999

Data Transfer: ReservationsDefinitionProcess of moving reservation data into the SAP System. This can be performed automatically ormanually. Reservations are used to plan goods issues or goods receipts. They are also used torepresent documents (such as purchase orders or production orders) from external system in theSAP System provided that the MM component Purchasing or the PP component ProductionOrders is not available.

Selection criteriaSelection is necessary if you require an interface for transferring reservation data either duringthe installation phase (once-only process; for example, transfer of previously existing data intothe SAP System) or during normal system operation (periodically; for example, as an interface toexternal systems).


Data Transfer: Physical Inventory

December 1999 39

Data Transfer: Physical InventoryDefinitionProcess of moving physical inventory data into the SAP System. This can be performedautomatically or manually.

Selection criteriaSelection is necessary if you require an interface for entering and processing inventory countresults from non-SAP systems.


Goods Receipt

40 December 1999

Goods ReceiptDefinitionGoods movement used to post the receipt of goods from an external supplier or from production.A goods receipt results in an increase in stock in the warehouse/stores.

The system distinguishes between the following types of goods receipt:

• Goods receipt with reference to a purchase order

• Goods receipt with reference to a production order

• Other goods receipts


Goods Issue and Return Delivery

December 1999 41

Goods Issue and Return DeliveryDefinitionGoods movement used to post material withdrawals/issues, material consumption, or deliveriesto customers (without SD Shipping). A goods issue results in a reduction in stock in thewarehouse/stores.

The system distinguishes between the following types of goods issue:

• Material withdrawals for orders

• Scrapping and material withdrawals for sampling

• Return deliveries to customers

• Other internal staging of material

• Deliveries to customers without using SD Shipping


Stock Transfer/Transfer Posting

42 December 1999

Stock Transfer/Transfer PostingDefinitionA stock transfer involves the removal of materials from storage at one location and their transferto and placement into storage at another. Stock transfers can occur within a single plant orbetween two different plants or company codes.

A transfer posting generally refers to a bookkeeping change - a change in information - about aparticular material (for example, releasing stock from quality inspection, converting special stock,such as consignment stock, into company’s own stock). In transfer postings, the goodsthemselves can remain at the same physical location or be simultaneously transferred to anotherlocation.

Stock transfers/transfer postings are used to represent internal transfers of stock or changes instock identification that are due to organizational factors (for example, decentralized storage).


Reservations

December 1999 43

ReservationsDefinitionPlanning of both outward movements (request for materials for a later date and for a certainpurpose) and inward movements (to simplify and accelerate the goods receipt process).

The purpose of a reservation for an outward movement is to ensure that a material will beavailable when it is needed. A material can be reserved for a cost center, asset, order, or project,for example. The purpose of reservations for planned receipts is to plan goods receipts fromvendors or production provided that the MM component Purchasing or the PP componentProduction Orders is not used.

Selection criteriaSelection is necessary if goods issues and/or goods receipts are to be planned manually (that is,not through purchase orders or production orders).


Physical Inventory

44 December 1999

Physical InventoryDefinitionDetermining and recording (by weighing, counting, measuring, or estimating) existing quantitiesof materials in order to establish the levels of stock actually on hand. Actual stock levels thusdetermined are compared with book inventory balances and any differences that may berevealed corrected as necessary.

The SAP System supports the following methods of physical inventory:

• periodic inventory

• continuous inventory

• cycle counting (inventory is counted at regular intervals within a fiscal year)

• inventory sampling (physical inventory of a small part of the stock (sample) that isrepresentative of the entire stock)


Balance Sheet Valuation Procedures

December 1999 45

Balance Sheet Valuation ProceduresDefinitionMaterial stocks can be valuated for balance sheet purposes using a number of different methods:

• Lowest value principle:This method valuates stocks as prudently as possible in accordance with the recognition-of-loss principle. Any expected losses are offset against inventory, the value of which isreduced accordingly.

• LIFO (last in first out) valuation:LIFO valuation allows the increase in the stock of a material to be valuated separately.With the LIFO method, the stocks of a material received most recently are considered tobe the first ones used. This means that rising prices do not lead to an over-valuation ofthe older (less expensive) stocks.

• FIFO (first in first out) valuation:With the FIFO method, the oldest stocks of a material are considered to be the first onesused. The value of the stock is therefore based on the most recent stock received.


Warehouse Management

46 December 1999

Warehouse ManagementDefinitionProvides flexible automated support that enables you to

• manage complex warehousing structures and facilities

• handle materials in automatic warehouses, all standard storage facilities and custom-designed storage areas

• process all WM-related postings and movement transactions

• implement a variety of putaway and picking strategies or use self-designed strategies

• process hazardous materials and any stock that requires special handling

• use real-time continuous inventory techniques

• use RF technology for all stock movements

• fully integrate your WM system with several SAP system components

The WM system supports the processing of all movements, goods receipts and goods issuesinitiated by the Inventory Management (IM) system as well as goods issues from the SD Shippingsystem. The WM interface to the Quality Management (QM) system allows warehouseadministrators to track and process inspection lots that are stored in the warehouse. The WMsystem also provides automated support for processes within a warehousing complex such ascrossdocking, changes in goods ownership, replenishment to fixed bin picking areas andproduction supply areas. Beginning with the planning phase, stock availability checks take placeautomatically in each of the respective systems.


Master Data

December 1999 47

Master DataDefinitionThe physical storage facilities of a company may exist in one or more physical buildings and canconsist of several types of storage (for example, high rack storage, block storage, picking areas)and other areas within the warehousing complex (such as interim staging areas for goods receiptand goods issue).

You can define an entire physical warehousing complex in the Warehouse Management (WM)system using a single warehouse number. Each of the storage facilities or areas can be definedas a storage type by its spatial, technical or organizational factors.

The maintenance of the warehousing structures is mandatory for the installation of theWarehouse Management system.

High rack storage

Storage type 001

Picking area

Storage type 005

Goods receipt

Goods issue

Storage type902

GR area

Storage type910

GI area

Block storage

Storage type 004


Warehouse Movements

48 December 1999

Warehouse MovementsDefinitionStock movements in the Warehouse Management (WM) system are generally initiated byanother system, such as the Inventory Management (IM) system, the Sales and Distribution (SD)system, Production Planning (PP) and Quality Management (QM). The warehouse movementscomponent makes it possible for you to carry out goods movement tasks in the warehouse.

Examples include:

• stock placement (putaway)

• stock removal and picking

• stock transfers and posting changes (i.e., release from inspection) in the WM system

• block processing of multiple transfer orders

• processing of inventory differences

• automatic transfer order creation

• transfer order confirmation

en

Goods receipt area

Warehouse

Store goods

Create transfer orderAssign destination

storage bin

Confirmtransfer order

Material available

Printtransfer order

Goods ReceiptProcess

Transfer requirementquantity posted

to GR area

Create goodsmovement in

IM system

Check quantity


Inventory at the Storage Bin Level

December 1999 49

Inventory at the Storage Bin LevelDefinitionThe physical recording of articles to determine the quantity of stock in the warehouse.

Unlike the material-related inventory in the Inventory Management (IM) system, the WM systemuses real-time continuous inventory techniques at the storage bin level. An inventory is regardedas complete if it has been taken for every storage bin in the warehouse at least once during thefiscal year. The inventory procedure can be defined individually for each storage type. Thismakes it possible to take specific technical and organizational aspects of the storage types intoconsideration.

The Warehouse Management (WM) system supports the following inventory methods:

• annual inventory count (also called periodic inventory)

• continuous inventory

• continuous inventory during stock placement

• continuous inventory based on zero stock check

• cycle counting

• inventory based on sampling procedures

System inventory records are automatically generated by the system. The system creates aninventory history for each storage bin and it is possible to access this record in dialog mode overa long period of time, even years.


Storage Unit Management

50 December 1999

Storage Unit ManagementDefinitionProvides the capability to manage and control material flow utilizing storage units (pallets andother containers) within the warehouse. A storage unit is a logical grouping of one or severalquantities of material that can be managed within a warehouse as a unit that belongs together.

All storage unit types, such as European pallets, wire baskets, and so on, together with theircontents, are assigned an identification number that is maintained in the system as the storageunit number. Therefore, it is possible at any given time to know where (in which storage bin) eachstorage unit is located, the amount of material contained in it, and which operations have beenprocessed (or planned) for it. Storage units can be either homogeneous (one material item) ormixed (several material items).

Selection criteriaSelection is necessary if you have warehouses or storage areas that are to be managed forstorage units.


Interfaces

December 1999 51

InterfacesDefinitionIn addition to the interfaces that integrate the Warehouse Management (WM) system in theoverall SAP System (IM, PP, SD, QM), interfaces exist to subordinate external control systems.For example, the WM system can also be interfaced to automatic and semi-automaticwarehouses through a warehouse control unit (WCU) and to fork lift control systems. Additionally,various processes can be supported by mobile data entry (MDE) equipment.

The WM-WCU interface functions bidirectionally to process

• transfer requirements

• transfer orders (including multiple processing)

• cancellation requests

• system inventory records

• storage units

• storage bin blocking

RF functions for MDE provide the capability to transmit data for

• system inventory documents and inventory count data (WM)

• warehouse movements (WM)

• goods movements (Inventory Management)

• planned warehouse movements (WM)

• transfer order processing (WM)

• replenishment control (WM)

• deliveries (Shipping)

• packaging (Shipping)

The primary means of data transfer takes by means of asynchronous transmission ofintermediate documents (IDocs).

Selection criteriaSelection is necessary if you require an interface to the non-SAP external systems describedabove.


Decentralized Warehouse Management

52 December 1999

Decentralized Warehouse ManagementDefinitionSAP R/3 decentralized WM user interface that is used in connection with an existing R/2 hostsystem.

The SAP decentralized Warehouse Management system has the following functionality:

• Creation and confirmation of transfer orders for goods movements

• Management of storage sections and bins in the warehouse

• Determination as to which posting changes must be carried out for warehouse stock

• Communication with the host system when it is in operation

Integration with the R/2 applications in Materials Management (MM) and Sales and Distribution(SD) is ensured by the asynchronous program-to-program communication setup. Stockmovements in the MM system initiate quantity postings in the WM system when required.Deliveries for shipping are transmitted to a decentralized unit. Afterwards, the actual quantitiesare confirmed as soon as picking is complete. If the host system is not available, any differencesfound or goods receipts from the production department are entered in the decentralized system.The posting is executed in the central Inventory Management (IM) system as soon as the hostsystem is active again.

The advantages of a decentralized Warehouse Management (WM) system include the following:

• 24-hour availability

• Reduction of system load in the R/2 host, thus improving system performance

• Independence from the host system

• User-friendly R/3 user interface

• Automatic reposting (carry-over) into the R/2 System.

• Working with two systems (R/3 and R/2) simultaneously

Selection criteriaThe Decentralized Warehouse Management system provides the capability for those whoalready have an active SAP R/2 host system to manage all warehousing activities using the R/3System user interface independently of the R/2 host.


Other Functions

December 1999 53

Other FunctionsDefinitionGlobal functions in Warehouse Management.

These include all the general functions that are associated with the Warehouse Managementsystem component.


Invoice Verification

54 December 1999

Invoice VerificationDefinitionTerm for the entry and checking of incoming (vendor) invoices.

In invoice verification, vendor invoices are compared with the purchase order and the goodsreceipt, and are checked for the accuracy of the content, price and quantity.


Basic Functions

December 1999 55

Basic FunctionsDefinitionGlobal functions in Inventory Management.


Preliminary Posting

56 December 1999

Preliminary PostingDefinitionPreliminary posting allows you to enter an invoice (or credit memo) in the system and store it in adocument without posting it. The document is “parked”. A parked document can be changed asoften as required. All changes made are documented. Only once the parked document has beenposted are the usual account movements and updates made.

Selection criteriaIf you select this component, you can park invoices before you post them in a separate step.Preliminary posting can be useful if you wish to check the contents before you post an invoice orif you wish to split responsibility for entering and posting invoices among employees.


Incoming Invoices

December 1999 57

Incoming InvoicesDefinitionThe receipt of an invoice issued by a vendor.

In general most invoices refer to a transaction for which the invoicing party is requestingpayment. Incoming invoices are checked differently depending on how the transaction isavailable in the system. Invoice Verification can be:

• goods-receipt-based

• purchase-order-based

• without referencing any other system document.

Blocking mechanisms can be defined for further checking.


Material Price Changes

58 December 1999

Material Price Changes


G/L Clearing Account Maintenance

December 1999 59

G/L Clearing Account MaintenanceDefinitionClearing accounts are auxiliary accounts used for posting reasons. Goods receipts and invoicereceipts are posted to them and cancel each other out.

Differences in quantity between a goods receipt and an invoice receipt that are not likely to becleared can be posted from the GR/IR clearing account.


Information System

60 December 1999

Information SystemDefinitionThe following information systems are available in Materials Management:

• Purchasing Information System

• Inventory Controlling

• Vendor Evaluation

The Purchasing Information System and Inventory Controlling are flexible controlling tools whichhelp you to collect, aggregate and analyze data from Purchasing and Inventory Managementrespectively. Both information systems can be used on different levels as an instrument formonitoring, controlling and planning your business processes.The Purchasing Information System and Inventory Controlling are part of the LogisticsInformation System (LIS), which also includes the Sales Information System. All informationsystems in LIS use the same techniques for analyzing data and they all have the same userinterface.

The Vendor Evaluation component provides the basis for making objective decisions on theselection of sources of supply and for monitoring existing supply relationships.Vendor Evaluation data can be analyzed in the Purchasing Information System using a standardanalysis.


Purchasing Information System

December 1999 61

Purchasing Information SystemDefinitionThe Purchasing Information System can be used at a variety of levels in the decision-makingprocess as an instrument for monitoring, controlling and planning your business operations.It is a flexible tool for collecting, aggregating and analyzing data from Purchasing. Theinformation system allows you to view all information in the operative application from a widerange of perspectives. You can also define the level of detail in which you wish to see theinformation.

The Purchasing Information System contains informative key figures which help you to detectand appraise changes and trends at an early stage. This means that you can permanentlymonitor key criteria and are in a position to take necessary action in good time.

The data is evaluated either by means of standard analyses or flexible analyses. Flexibleplanning, the Early Warning System and the Logistics Information Library are integrated in thePurchasing Information System.Tools are available in Customizing, which allow you to apply a self-defined structure to yourinformation system and tailor it to meet your own specific requirements.

The Purchasing Information System is part of the Logistics Information System (LIS), which alsoincludes the Sales Information System and Inventory Controlling. All information systems in LISmake use of the same techniques for analyzing data and they all have the same user interface.

Selection CriteriaUse of the Purchasing component is a prerequisite for the Purchasing Information Systemcomponent. It is also possible, however, to include external data (e.g. from R72 or from non-SAPsystems).

If you select the Purchasing Information System component while you are in the MaterialsManagement application itself, then you do not need to select the Logistics Information Systemcomponent at Logistics General level.


Reporting

62 December 1999

ReportingDefinitionThe reporting component comprises the standard analyses and flexible analyses of thePurchasing Information System. The standard and flexible analyses enable you to analyze andevaluate data which is written to the Purchasing Information System.

• Standard analysesThe standard analyses are based on statistical data from Purchasing and provide a widerange of options for evaluating data. A great variety of functions are available as part ofthe standard analyses. These functions enable you to target specific key figures and toanalyze them in detail (e.g. ABC analysis, cumulative frequency curve, correlation curve,previous year comparison, planned/actual comparison, etc.). You can specify the level ofdetail in which you wish to view the information. The values for each list can also beviewed graphically.

• Flexible analysesFlexible analyses allow you to group together and aggregate key figures yourself, and tocreate reports very easily. This makes use of functionality in the Report Writer. Differentdisplay types enable you to vary the layout of your reports.


Planning

December 1999 63

PlanningDefinitionThe planning functionality of the LIS information systems is integrated into the central componentSales & Operations Planning (SOP).

Sales & Operations Planning (SOP) is a flexible forecasting and planning tool with which sales,production, and other supply chain targets can be set on the basis of historical, existing, and/orestimated future data. Rough-cut planning can also be carried out to determine the amounts ofthe capacities and other resources required to meet these targets.

SOP supports both the high-level planning of complex planning hierarchies and the detailedplanning of finished products. Thus, either a top-down or a bottom-up approach to planning ispossible. The system can be configured either such that target key figures set at oneorganizational level are distributed automatically and consistently to all the other organizationallevels in the hierarchy, or such that each level is planned separately.

Sales & Operations Planning is made up of two elements: standard SOP and flexible planning.Standard SOP comes largely preconfigured with the system. Flexible planning offers multipleoptions for customized configuration. Planning in standard SOP is based on product grouphierarchies and is always carried out level by level. Flexible planning is carried out on hierarchiescontaining any chosen organizational levels (for example, storage location, material, and plant).Moreover, in flexible planning the content and layout of planning screens can be defined by theusers.

Selection CriteriaThis component focuses on flexible planning.

To run SOP in a distributed environment, select also Application Link Enabling (ALE).


Data Collection

64 December 1999

Data CollectionDefinitionThe data collection component (Logistics Data Warehouse) is central to the Logistics InformationSystem (LIS) and is integrated in all LIS information systems.

The functionality in this component allows you to define and construct your own Logistics DataWarehouse. This takes place in the data collection component. Variable data structures are usedto ensure that the varying requirements of different user groups and applications are satisfied.The so-called self-defined information structures play a key role in this process. A variety of toolsallow these structures to be filled with customer-specific data (even external data).

In addition, the data collection component contains functions which allow you to define the way inwhich statistical data from the application is written to the information system. Update groups andupdate rules are also available to help you with your definition.

Selection CriteriaSelection of the data collection component is a prerequisite for using all other components in thelogistics information systems.


Logistics Information Library

December 1999 65

Logistics Information LibraryDefinitionThe Logistics Information Library (LIL) helps you to create, classify and find key figures in thearea of Logistics and is integrated in all information systems of the Logistics Information System(LIS) as an individual menu option.

The Logistics Information Library uses simple search strategies which enable you to access allkey figures in the LIS information systems. The LIL also offers you the option of cataloging andstructuring key figures.

The LIL also allows you to access key figures that are not integrated in any key figure systemand those that have been created specifically for your business purposes. The LIL enables you tointegrate reports, transactions, information systems and tables from different areas of Logistics,such as Purchasing, Sales and Production.

It is possible to search for and call up a specific key figure, without knowing the exact name ofthe report, the transaction code or the menu path.


Early Warning System

66 December 1999

Early Warning SystemDefinitionThe Early Warning System aids the decision-making process by enabling you to select andmonitor weak points in Inventory Management. The Early Warning System is integrated inInventory Controlling. The key figures of Inventory Controlling form the basis for the analysis.The Early Warning System allows you to search for exceptional situations and thus helps you todetect and rectify potential problems at an early stage.

You can define your own exceptional situations in the form of ‘exceptions’, as well as theconditions for subsequent follow-up processing. If an exceptional situation occurs, then you canbe informed automatically by mail or fax, for instance, or you can view the critical data in thesystem. The display of the critical data is supported by various visualization techniques.


Inventory Controlling

December 1999 67

Inventory ControllingDefinitionInventory Controlling can be used at a variety of levels in the decision-making process as aninstrument for monitoring, controlling and planning your business operations.It is a flexible tool for collecting, aggregating and analyzing data from Inventory Management.The information system allows you to view all information in the operative application from a widerange of perspectives. You can also define the level of detail in which you wish to see theinformation.

Inventory Controlling allows you to ascertain those materials with a high capital lockup, aninefficient stock proporation, or whose range of coverage is too great, thus necessitating closerinspection. You are given important information which enables you to adapt control parameterssuch as safety stock levels or lot size, and to improve organizational measures such assynchronizing issues and receipts.On the basis of Inventory Controlling, you can set an appropriate stock level (e.g. by reducingtargeted stocks) and thus make optimum use of storage and handling capacities.

The data is evaluated either by means of standard analyses or flexible analyses. Flexibleplanning, the Early Warning System and the Logistics Information Library are integrated inInventory Controlling.Tools are available in Customizing, which allow you to apply a self-defined structure to yourinformation system and tailor it to meet your own specific requirements.

Inventory Controlling is part of the Logistics Information System (LIS) which also includes thePurchasing Information System and the Sales Information System. All information systems in LISmake use of the same techniques for analyzing data and they all have the same user interface.

Selection CriteriaUse of the Inventory Management component is a prerequisite for the Inventory Controllingcomponent. It is also possible, however, to include external data (e.g. from R/2 or from non-SAPsystems).

If you select the Inventory Controlling component while you are in the Materials Managementapplication itself, then you do not need to select the Logistics Information System component atLogistics General level.


Reporting

68 December 1999

ReportingDefinitionThe reporting component comprises the standard analyses and flexible analyses of InventoryControlling. The standard and flexible analyses enable you to analyze and evaluate data which iswritten to Inventory Controlling.

• Standard analysesThe standard analyses are based on statistical data from Inventory Management andprovide a wide range of options for evaluating data. A great variety of functions areavailable as part of the standard analyses. These functions enable you to target specifickey figures and to analyze them in detail (e.g. ABC analysis, cumulative frequency curve,correlation curve, previous year comparison, planned/actual comparison, etc.). You canspecify the level of detail in which you wish to view the information. The values for eachlist can also be viewed graphically.

• Flexible analysesFlexible analyses allow you to group together and aggregate key figures yourself, and tocreate reports very easily. This makes use of functionality in the Report Writer. Differentdisplay types enable you to vary the layout of your reports.


Planning

December 1999 69

PlanningDefinitionThe planning functionality of the LIS information systems is integrated into the central componentSales & Operations Planning (SOP).

Sales & Operations Planning (SOP) is a flexible forecasting and planning tool with which sales,production, and other supply chain targets can be set on the basis of historical, existing, and/orestimated future data. Rough-cut planning can also be carried out to determine the amounts ofthe capacities and other resources required to meet these targets.

SOP supports both the high-level planning of complex planning hierarchies and the detailedplanning of finished products. Thus, either a top-down or a bottom-up approach to planning ispossible. The system can be configured either such that target key figures set at oneorganizational level are distributed automatically and consistently to all the other organizationallevels in the hierarchy (for example, to all materials and plants in a particular purchasingorganization), or such that each level is planned separately.

Sales & Operations Planning is made up of two elements: standard SOP and flexible planning.Standard SOP comes largely preconfigured with the system. Flexible planning offers multipleoptions for customized configuration. Planning in standard SOP is based on product grouphierarchies and is always carried out level by level. Flexible planning is carried out on hierarchiescontaining any chosen organizational levels (for example, purchasing organization, material, andplant). Moreover, in flexible planning the content and layout of planning screens can be definedby the users.

Selection CriteriaThis component focuses on flexible planning.

To run SOP in a distributed environment, select also Application Link Enabling (ALE).


Data Collection

70 December 1999

Data CollectionDefinitionThe data collection component (Logistics Data Warehouse) is central to the Logistics InformationSystem (LIS) and is integrated in all LIS information systems.

The functionality in this component allows you to define and construct your own Logistics DataWarehouse. This takes place in the data collection component. Variable data structures are usedto ensure that the varying requirements of different user groups and applications are satisfied.The so-called self-defined information structures play a key role in this process. A variety of toolsallow these structures to be filled with customer-specific data (even external data).

In addition, the data collection component contains functions which allow you to define the way inwhich statistical data from the application is written to the information system. Update groups andupdate rules are also available to help you with your definition.

Selection CriteriaSelection of the data collection component is a prerequisite for using all other components in thelogistics information systems.


Logistics Information Library

December 1999 71

Logistics Information LibraryDefinitionThe Logistics Information Library (LIL) helps you to create, classify and find key figures in thearea of Logistics and is integrated in all information systems of the Logistics Information System(LIS) as an individual menu option.

The Logistics Information Library uses simple search strategies which enable you to access allkey figures in the LIS information systems. The LIL also offers you the option of cataloging andstructuring key figures.

The LIL also allows you to access key figures that are not integrated in any key figure systemand those that have been created specifically for your own business purposes. The LIL enablesyou to integrate reports, transactions, information systems and tables from different areas ofLogistics, such as Purchasing, Sales and Production.

It is possible to search for and call up a specific key figure, without knowing the exact name ofthe report, the transaction code or the menu path.


Early Warning System

72 December 1999

Early Warning SystemDefinitionThe Early Warning System aids the decision-making process by enabling you to select andmonitor weak points in purchasing processes. The Early Warning System is integrated in thePurchasing Information System. The key figures of the Purchasing Information System form thebasis for the analysis.The Early Warning System allows you to search for exceptional situations and thus helps you todetect and rectify potential problems at an early stage.

You can define your own exceptional situations in the form of ‘exceptions’, as well as theconditions for subsequent follow-up processing. If an exceptional situation occurs, then you canbe informed automatically by mail or fax, for instance, or you can view the critical data in thesystem. The display of the critical data is supported by various visualization techniques.


Vendor Evaluation

December 1999 73

Vendor EvaluationDefinitionThis provides the basis for making objective decisions with regard to the selection of sources ofsupply and the control of supply relationships.

The evaluation is made up of a points score which is awarded to the vendor on the basis ofseveral criteria (in the standard system, they are price, quality, delivery reliability, service andexternal service), which can then be divided into subcriteria. The scores for the criteria can beentered manually or they can be determined by the system on the basis of existing data, eitherautomatically or semi-automatically. You can use the criteria provided in the standard system,and/or define your own criteria.

Analyses enable you to compare a number of vendor evaluations or to display those vendorswho have not yet been evaluated, for instance.j y

comparability


Electronic Data Interchange

74 December 1999

Electronic Data InterchangeDefinitionThe electronic, inter-company exchange of structured data (for example, trade douments)between national and international business partners, who may be using different hardware,software, and communications services.

EDI is used for the electronic transmission of data in message form.


Outbound Message Processing

December 1999 75

Outbound Message ProcessingDefinitionThe process of transmitting EDI messages (for example, purchase orders) to vendors. Viaoutbound message processing, you can control the running of programs and subprograms for thedocument data that is to be transmitted until this data is transferred in the form of an intermediatedocument (IDoc) to the EDI subsystem.

A prerequisite for the transmission of EDI documents within the Purchasing area is priormaintenance of the outbound message processing facility.


Inbound Message Processing

76 December 1999

Inbound Message ProcessingDefinitionThe process of receiving EDI messages (for example, invoices or shipping notifications) fromvendors. Via inbound message processing, you can control the running of programs andsubprograms for the data received from the subsystem until this data is entered in the relevantapplication.

A prerequisite for receiving EDI documents within the Purchasing area is prior maintenance ofthe inbound message processing facility.

Documents

MM Component Short Description - Jessemerin.com · Materials Management December 1999 7 Materials Management Definition With the Purchasing System, requirements of materials or services