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SAP MM Overview R3

The document provides an overview of SAP's Materials Management (MM) module. Key points include: - MM handles procurement, inventory management, materials planning, master data, and invoice verification. - It helps companies accurately track inventory, audit materials valuation, and centralize procurement. - The organizational structure includes clients, company codes, plants, storage locations, purchasing organizations, and purchasing groups. - Main processes are procurement, inventory management, materials valuation, and materials requirements planning. - MM is integrated with other modules like production, sales, finance, and warehouse management.

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544 views

SAP MM Overview R3

The document provides an overview of SAP's Materials Management (MM) module. Key points include: - MM handles procurement, inventory management, materials planning, master data, and invoice verification. - It helps companies accurately track inventory, audit materials valuation, and centralize procurement. - The organizational structure includes clients, company codes, plants, storage locations, purchasing organizations, and purchasing groups. - Main processes are procurement, inventory management, materials valuation, and materials requirements planning. - MM is integrated with other modules like production, sales, finance, and warehouse management.

Uploaded by

yusefalva
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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SAP MM Overview

Author Written by Osemerin Ndidi-Nwudu and last updated on Posted onSeptember 13, 2017.

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The Materials Management (MM) module is the business


process area that handles daily activities of a business such as Procurement, Inventory
Management, Materials Requirement Planning, Master data (Material and
Vendor), Material Valuation, Vendor Evaluation, Invoice Verification and so on. Most
business that operate in the manufacturing sector find this SAP module very useful as it
helps in optimizing business processes. This article will provide SAP MM overview that
will be help to quickly understand functionality of this SAP module.

Why Companies Need SAP MM and What This Module


Does?
Most companies that run a large and robust supply chain processes would find MM very
useful in their day-to-day business operations. One major importance of MM is in its ability
for accurate stock taking which is very useful to the manufacturing industry where material
availability for use in production activities is of utmost importance as this has the potential
to either make or mar the production cycle. Hence, MM plays a vital role in Materials
Requirement Planning for manufacturing companies with particular importance to those
who deal in fast moving consumer goods. Another importance of MM to companies is in
its procurement mix which involves the procurement of materials of stock and non-stock
and also the procurement of services. It also helps in the management of waste and
reduction in duplicity of inventory stock items.

With the use of this module, most companies are able to keep accurate records of their
stock inventory, have a proper audit of material valuation, and stock tracking in the various
regions of business operations. Hence, the module helps to promote a centralized
repository of total company inventory stock. Also, procurement can be centralized and
used to capture all associated cost elements such as freight cost, custom duties,
transport/delivery charges, loading and unloading charges etc. With this module
procurement is also able to liaise with stores to monitor closely demand and supply of
material stock in order to ensure optimal stock levels are observed at all times during the
production cycle.

SAP MM Organizational Structure


Next, let us describe organizational units of Material Management in our SAP MM
overview. Most companies have a framework upon which their business operations are
conducted. This framework is usually referred to as organization structure or in SAP
parlance enterprise structure. The enterprise structure is composed of a number of
organizational units which relates to one another. To establish this relationship between
the levels it is important that we assign them in such a way that they lie in the same
hierarchy.

SAP MM Organizational Structure


Download this slide as PDF: SAP MM Organizational Structure PDF.

Client
Within the SAP system we consider a client as self-contained in terms of data, and it is
the highest hierarchical level in the SAP system. All specifications as it relates to data
entered at this level is applied to all company codes and all the other organizational units.
In a particular R/3 system, we can have single or multiple company codes depending on
the business requirements as it pertains to the company operations. Hence, a client key
is usually used as a unique identifier when access to the respective clients are needed.

Company Code

Following the client is the company code where replication of independent accounts can
be performed. It is the smallest unit in the organization where this takes place. This
represent an independent unit of Balance Sheet, and Profit and Loss Accounting, e.g. as
seen in a company within a corporate group. As stated earlier, several company codes
can exist in a single client in order to thus keep separate sets of financial books.

Plant

A plant is regarded the logistics unit within the organizational hierarchy handles the
procurement of materials, services, production, materials valuation, materials planning,
and inventory. In some other business scenarios, a plant can represent a Manufacturing
Facility, a Distribution Centre, Sales Regions, Head offices (e.g., in banking sector) or a
maintenance office (e.g., in maintenance planning plants) within a company.

Storage Location

Differentiation of material stocks within a plant takes place at the storage location level.
Here also, we monitor goods movements in and out of inventory and carry out physical
inventory count to ascertain inventory levels at given periods.

Purchasing Organization

The purchasing organization unit is responsible for procurement of materials or services


on behalf of the company. It also negotiates conditions of purchase with vendors. A
purchasing organisation can procure for several company codes (centralized
purchasing), specific company code (company specific), and specific plants (plant
specific) depending on the configurations.

Purchasing Group
This organizational unit is responsible for the everyday procurement activities that go on
in an organization. Usually, they comprise a group of buyers, depending on the size of
the company, and are responsible for procurement of goods and services.

Overview of The Main Business Processes in SAP MM


The main business processes in MM can be broken down into procurement, inventory
management, material valuation, and materials requirement planning. Invoicing is inter-
related and though sites in MM some companies prefer their Finance departments to
handle this operation.

Procurement

Procurement begins from raising requisitions from requesting departments or process


orders from production or work orders from maintenance or sales orders from sales unit,
or as a result of materials reservation from the material planner. Next is for the
procurement team to send out quotation request to source vendors for the procurement
of these items of material or services. Vendor selection then takes place and purchase
orders are generated capturing all the associated cost elements as agreed.

Inventory Management & Service Entry and Acceptance

Subsequently, upon delivery of the goods or services a good receipt is carried out or
service entry and acceptance based on the scenario in play. For goods receipts, the
various stocks inventory is updated and the system debits and credit the respective
general ledger accounts automatically as configured in MM. Also, in inventory, depending
on the stock type and its use, stocks are made available to production, projects,
warehouse as the case may be. Service entry for value of work done is accepted and
processed onwards to invoicing.

Invoice verification

This process most times looks at what value of items of stock of service was received
and processes payments based on this information. In SAP MM this is referred to as the
3-way match. Hence, payments are based on goods receipt quantities not Purchase order
quantities.

SAP MM Integration with Other SAP Modules


The next section of SAP MM overview is related to integration. SAP MM is strongly
integrated with other modules. As the backbone of the logistics it is integrated with
Production Planning (especially in Material Requirements Planning), Sales and
Distribution, Warehouse Management, Transportation Management, Shipping,
Environment, Health and safety, Quality Management (for stock materials that most pass
through quality assurance procedure), Plant Maintenance (in the areas of bills of
materials used for materials spares), Project Systems (WBS elements), and in newer SAP
solution areas like Supply Chain Management (SCM), Supplier Relationship
Management (SRM).

SAP MM is also strongly integrated with Financials module as every postings occurring
in inventory has direct impacts on general ledger accounts which report to balance sheet
and profit and loss statements. Material valuation also integrates with Finance. It also
integrates with the Controlling module in areas of budget controls for release for funds to
procurement. Other areas of integration points are with Human Resource Management
module in the use of organization level in defining release approval for purchase orders
based on positions IDs of the responsible staff personnel.

And in addition to this SAP MM overview, I would like to talk a little about Master Data in
Materials Management.

Master Data in SAP MM


We have several master data in MM comprising: Materials Master Data, Vendor Master
Data, Purchasing Information Records, and Source Lists.

Material Master Data

Here, based on the purpose for use of the material we can define the material type views,
if it is non-stock, its valuation class, price control and valuation type if it is split evaluated.

Vendor Master Data

Vendors can be maintained centrally or to specific purchasing organization. Usually for


each vendor a defined vendor account grouping code is used in its maintenance and this
determines whether it is domestic, or foreign, or one-time vendor.

Purchasing Info Record


This here is used to maintain information between various vendor and agreed price and
cost elements for supply of stock materials. In MM what the system does is to refer to the
price in the info record for any purchase order being created for that particular material
against the vendor.

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