SAP MM Interview Questions & Answers for Freshers

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  1. Introduction to SAP MM

1.      What is SAP? How is it used in industries?

                      SAP is the most popular enterprise resource planning (ERP) software application used to provide
enterprise business solutions. It was first introduced in 1972 in Mannheim, Germany. SAP stands for Systems,
Applications, and Products in Data Processing.

                      SAP provides complete business solutions by integrating various business tasks such as sales,
purchase, and production. SAP takes information from one business process and incorporates it into another
business process, thereby speeding up all business processes. For example, information about the raw material
in stock is used by the production department to determine how to prepare products.

                               SAP is widely used in various industries because as it updates and processes important
data very quickly, it can automate business processes and provide real-time solutions for businesses.
2.     Briefly describe the history of the SAP software.

                           The SAP software was developed by a company of the same name. SAP (the company) was
founded in 1972 by five former IBM employees: Dietmar Hopp, Hans-Werner Hector, Hasso Plattner, Klaus
Tschira, and Claus Wellenreuther.

                                SAP released its mainframe product, called SAP R/2, in 1979. The client/server version of
the SAP software, called SAP R/3, was released in 1992. Today, SAP is the largest vendor of standard
business-application software.

                               SAP constantly delivers scalable solutions to its customers, allowing them to respond to
dynamic market conditions and helping them to maintain an advantage over their competitors. Some of the
major SAP applications presently available are defined in question 4 and include SAP R/3, mySAP ERP, mySAP
Customer Relationship Management (CRM), mySAP Supplier Relationship Management (SRM), mySAP Supply
Chain Management (SCM), and mySAP Product Lifecycle Management (PLM), to name a few.
3.     What is mySAP ERP? What are the other business components?

                           mySAP ERP is the next-generation ERP application from SAP AG in Germany, and was first
launched in 2003. The mySAP ERP application has all the features of previously released SAP ERP software,
such as SAP R/3 and SAP Strategic Enterprise Management (SEM), along with its own extensions. The mySAP
ERP application provides e-commerce solutions by using Web technology. The mySAP ERP application has the
following advantages:

o    Mobile infrastructure, which improves workforce mobility

o    Transparency through a business intelligence framework

o    Delivery of people-centric services

o    Faster access to information, which facilitates quick decision making

o    Seamless integration of processes throughout the business

         mySAP ERP includes the following products:

o    mySAP Enterprise Resource Planning (ERP)

o    mySAP Supply Chain Management (SCM)

o    mySAP Supplier Relationship Management (SRM)

o    mySAP Customer Relationship Management (CRM)

o    mySAP Product Life Cycle Management (PLM)

         mySAP R/3 can be classified into the following business components:

o    Financial applications

o    Human resource applications

o    Logistics

o    Sales and distribution applications

4.     What are the industry-specific solutions available in mySAP?

The mySAP ERP application provides business solutions for almost every industry, including automotive,
chemical, and media. Various industry-specific solutions available in mySAP include the following:

         mySAP Automotive
         mySAP Aerospace and Defense
         mySAP Consumer Products
         mySAP Banking
         mySAP Chemicals
         mySAP High Tech
         mySAP Engineering and Construction
         mySAP Healthcare
         mySAP Higher Education and Research
         mySAP Insurance
         mySAP Media
         mySAP Oil and Gas
         mySAP Mill Products
         mySAP Mining
         mySAP Public Sector
         mySAP Pharmaceuticals
         mySAP Service Providers
         mySAP Retail
         mySAP Telecommunications
         mySAP Utilities
5.     What is SAP R/3?

         SAP R/3 is an ERP software that was officially launched in 1992. It is a replacement for the SAP R/2
mainframe computing-based ERP software and is based on client-server computing. With the advent of client-
server computing, SAP AG in Germany (founder of the SAP ERP software) launched SAP R/3 to provide client-
server-based real-time business solutions. The letter "R" in SAP R/3 represents the real-time business data
processing, while the number "3" represents the three tiers in client-server computing.

         The three tiers in client-server computing are: presentation (client), application (business logic), and database
(stores the actual business data).

         SAP R/3 integrates various business areas, such as sales, purchase, and procurement, by using different
functional modules, such as Materials Management (MM), Sales and Distribution (SD), Financial (FI),
Controlling (CO), and Human Resource (HR).

       Different versions of SAP R/3 include 3.1i, 4.0b, 4.5b, 4.6b, 4.6c,ECC 5.0,ECC 6.0; the latest version is ECC
6.0.       
6.     How different versions of SAP evolved?

Since its inception, SAP has continued to support changing business processes and to adapt itself to the needs
of organizations. In order to support the most current business strategies, SAP has evolved over time and
progressed through the following versions:

         SAP R/1—This was the first version of SAP and was developed for financial accounting systems. This
version is no longer available.

         SAP R/2—This was the second version of SAP. It replaced the R/1 version in the 1970s and was a mainframe-
based business application. SAP R/2 supported multiple currencies and languages to help internationalize
business management. This version is also no longer available.

       SAP R/3— This version replaced SAP R/2, adding support for client-server-based distributed systems. This
new version of SAP is multi-platformed, meaning it can be installed and used on multiple platforms, such as
Windows or UNIX.
7.     Why are industry-specific solutions used in SAP R/3?

         Industry-specific solutions are used in the SAP R/3 ERP application in order to automate various business
processes for almost every industry, including automotive, oil and gas, and chemical. By automating business
processes, the SAP R/3 application helps organizations meet the following challenges:

o    E merging markets— Earning revenue in emerging markets

o    Competition—Maintaining successful business operations in a world of fierce competition

o    Increasing demands— Handling increasing and varying customer demands

o    Labor issues— Solving the problems that arise for business operations requiring efficient skilled labor

o    Workforce shortages—Solving the problem of a shortage of skilled personnel

         The importance of industry-specific solutions comes from a very basic foundation of thought: every type of
business is unique and therefore needs to be catered to accordingly. The same philosophy may not be
applicable for automotive businesses and integrated steel plants, because both require entirely different
approaches to business planning. The automotive industry is based on the assembling of equipment and parts–
discrete manufacturing, whereas the integrated steel plant is a continuous manufacturing unit. Therefore,
each business's functionalities are different in areas such as production and inventory management.
8.     What benefits are envisaged after implementing SAP in any organization?

After the installation of SAP R/3 in an organization, the following changes will occur:

         Improvement in project management and project execution capabilities

         Integration of suppliers and subcontractors

         Optimization of sales-order capabilities

         Comprehensive business support specific to a particular industry type

         Minimal cost of ownership

         Uniformity of business processes

         Ability to make safe strategic choices

9.     What are the different Modules in SAP R/3?

To integrate various business processes, SAP R/3 comes with various modules, such as MM, SD, and CO. These
modules are further grouped into various business-functional areas. The functional areas and the SAP R/3
modules in those functional areas are as follows:

         Financial applications—Deals with an organization's financial matters, such as preparing and analyzing financial
documents and reporting the document output to the appropriate authorities for further processing. To
manage all these concerns, the following SAP R/3 modules are grouped in this functional area:

o    FI—Financial Accounting

o    CO—Controlling

o    EC—Enterprise Controlling
o    IM—Investment Management

o    TR—Treasury

         Human resources—Deals with documents related to an organization's human resources department. The SAP
R/3 modules grouped in this area help an organization to manage processes such as salary creation and
distribution, employees' payroll across the organization, and transferring data to other relevant departments,
such as finance. This area consists of the following modules:

o    Personnel Management

o    Time Management

o    Payroll

o    Training and Event Management

o    Organizational Management

         Logistics applications —This is the largest area covered by SAP R/3. This area helps manage broad-level
business processes such as sales and distribution of products, materials management, production planning, and
quality management. This area consists of the following modules:

o    MM—Materials Management

o    SD—Sales and Distribution

o    PP—Production Planning

o    PM—Plant Maintenance

o    LO—Logistics

o    QM—Quality Management

o    PS—Project System

o    WM—Warehouse Management
10.    What are the core functionalities of the SAP system?

The core functionalities of the SAP system are Sales and Distribution (SD), Materials Management (MM),
Financial Accounting (FI), and Production Planning (PP). In the first phase, companies implement the SAP
software with these core functionalities. Later, in the second and third phases, they may also introduce other
functionalities, such as Controlling (CO), Warehouse Management (WM), and Human Resource (HR). However,
the types of modules and the phasing of implementation depends solely on the type of industry in which the
client works, as well as the organization's readiness and the urgency with which the integrated enterprise
system, such as SAP, must be adopted.
11.    How can you define an MM module? What is its importance in SAP R/3?
  MM stands for Materials Management and is a part of the Logistics functional area of SAP R/3. It is an
important SAP R/3 module because it helps manage broad-level business activities, such as procurement,
valuation and assignment, batch management, and materials storage. Since materials are the most precious
resource of an organization, extreme care needs to be taken in all the processes related to materials
management. Efficient materials management is the essence of the MM module of SAP R/3.
12.    How is the MM module integrated with other modules of SAP?

         The MM module deals with materials procurement on the basis of the production required; therefore, it is
linked with the PP module.

         The SD module is proportionally related to the MM module, because it uses information about the quantity of
material sent for production.

         The WM module is related to the MM module, because the MM module maintains information about materials
storage and materials transfers inside an organization.

         The FI module is also related to the MM module, because every operation performed in the MM module
directly impacts the financial processes of the organization.
13.    What are the main components of the MM module? How are these components used in SAP?

         The MM module deals with materials procurement on the basis of the production required; therefore, it is
linked with the PP module.

         The SD module is proportionally related to the MM module, because it uses information about the quantity of
material sent for production.

         The WM module is related to the MM module, because the MM module maintains information about materials
storage and materials transfers inside an organization.

         The FI module is also related to the MM module, because every operation performed in the MM module
directly impacts the financial processes of the organization.

   2. Organizational Structure

1.      What is the organizational structure in the MM module?

The organizational structure in the MM module is a hierarchy in which various organizational units are
arranged according to their tasks and functions. The different organizational units that constitute the
organizational structure of the company are as follows:

         Client— A self-contained unit in the SAP system with separate master records and its own set of tables.
         Company code— The smallest organizational unit. You can create an independent set of accounts for this unit
for the purpose of external reporting.

         Plant— An organizational unit where materials are produced or goods and services are provided. You can divide
an enterprise into various plants according to production, procurement, maintenance, and materials planning.

         Storage location— An organizational unit where the goods produced in the plant are stored.

         Warehouse number— An alphanumeric key that represents a warehousing system, which is made up of
different organizational and technical storage areas.

         Storage type— An area such as a goods receipt area, goods issue area, or picking area. Also the physical or
logical division of a complex warehouse.

         Purchasing organization—An organizational unit that procures materials and services and negotiates with
vendors to purchase materials or goods.

         Purchasing group— An alphanumeric key for a buyer or a group of buyers who are involved in purchasing
activities. The purchasing group is responsible for materials procurement and dealing with vendors.
2.     What are the levels of organizational units of Enterprise Structure in R/3?

The client is the highest level unit of the organizational units in Enterprise Structure in SAP R/3. The client is
followed by the company code, which represents a unit with its own accounting, balance, and profit and loss
(P&L). The next level of organizational units in Enterprise Structure is the plant, which represents an
operational unit of a company.
3.     Define Client. What is its importance in SAP?

         A client can be defined as a person, company, or organization that purchases goods from another person,
company, or organization. In terms of SAP, a client is defined as a unit that has its own master records and a
set of tables. The client is important in SAP because it stores and maintains data about the organization
where SAP is implemented.
4.     How to create a client in MM module?

You can create a client in the MM module either by using the transaction code SCC4 or by performing the
following steps:

         Select SAP Menu > Tools > Administration > Administration > Client Administration .

         Double click SCC4–Client Maintenance. The display view Clients: Overview screen appears.

         Select Display > Change. The information dialog box appears.

         Click Continue. The change view Clients: Overview screen appears, where you can create a new client.
5.     Define company. How is it different from a client? What are the data in MM that are  maintained at the
company code level?

         A company is an organizational unit for which individual financial statements are drawn per the relevant
commercial laws. A company consists of one or more company codes. Within a company, all company codes must
use the same transactions in addition to the same fiscal year breakdown; however, company code currencies
can vary.

         A company is different from a client because a client can itself be a company, or an organization that has
multiple companies. For example, the owner of the entire SAP system is a client. The system will have only one
operational client, but the client may further have a group of companies. The following data are held at the
company code level:

o    Material number

o    Classification data

o    Multilingual description

o    Units of measure

o    Technical data
6.     How to create a company code in SAP?

         In SAP, a company code is created using the transaction OX02. The company code field is represented by a
four-character alphanumeric string. You can create a company code in SAP by performing the following steps:

o    Open the SAP Customizing Implementation guide.

o    Select Enterprise Structure > Definition > Financial Accounting > Edit, Copy, Delete, Check Company Code . The
Choose Activity dialog box appears.

o    Double-click Edit Company Code Data. The change view Company Code: Overview screen appears where you can
create a company code.
7.     How can you assign a company code to a company in SAP?

         In SAP, a company code is created using the transaction OX02. The company code field is represented by a
four-character alphanumeric string. You can create a company code in SAP by performing the following steps:

o    Open the SAP Customizing Implementation guide.

o    Select Enterprise Structure > Definition > Financial Accounting > Edit, Copy, Delete, Check Company Code . The
Choose Activity dialog box appears.

o    Double-click Edit Company Code Data. The change view Company Code: Overview screen appears, where you can
create a company code.
8.      How many charts of accounts can be assigned in a company?

Yes. One chart of accounts can be assigned to several Company Codes. However, the reverse is not possible;
i.e., you will not be able assign more than one chart of accounts to a single Company Code.
9.     How many company codes can be assigned in one chart of accounts?

You can assign many company codes to a chart of accounts.

10    How many company codes can be assigned to a company?

You can assign only one company code to a plant.

11.    What is a plant in MM?

A plant is an organizational unit where materials are produced or goods and services are provided. In SAP, a
plant is represented by a unique four-digit alphanumeric number. A plant is allocated to one company code, and
a company can have many plants. In the organizational unit, a plant can be at one of the following locations:

         Corporate headquarters

         Central delivery warehouse

         Manufacturing facility

         Regional sales office

12.    How is a plant defined in MM?

You can define a plant in the MM by performing the following steps:

         Select IMG > Enterprise Structure > Definition > Logistic–General > define, Copy, Delete, Check Plant .

         Click Execute. The Choose Activity dialog box appears.

         Select Define Plant to create a plant. The change view Plants: Overview screen appears.

         Click New Entries. The New Entries: Details of Added Entries screen appears.

         Specify the plant code in the plant field.

         Click the address icon to display the Edit Address field.

         Specify the required values in the fields, such as Title, Name, and Search Term 1/2.

         Click OK. The New Entries: Details of Added Entries screen appears again.

         Click the Save icon to save the newly defined plant.
13.    What are the prerequisites for creating a plant?

There are three prerequisites that are required in order to create a plant. They are as follows:

         Company calendar —Comprised of work days, public holidays, and company holidays. Every SAP system is provided
with a company calendar that can be modified per the schedule of the company.

         Country key —Helps in defining a plant.

         Region key —Refers to a state or province that is associated with the country. It is required along with the country
key.

14.    How many company codes can be assigned to a plant?

You can assign only one company code to a plant.

15.    Can a company code be assigned to many plants?

You can assign many plants to one company code.

16.    What is the menu path to assign a plant to a company code?

You can assign a company code to a plant by navigating the following menu path: SAP Menu > Tools >
Customizing > IMG > Execute Project > Display IMG (SAP reference IMG) > Enterprise Structure > Assignment
> Logistics-General > Assign Company Code to Plant.

17.     Define Storage location in SAP.

         A storage location is defined by performing the following steps:

o    Select Tools > Customizing > SAP Reference IMG > Edit Project .

o    Select Enterprise Structure > Definition > Materials Management > Maintain Storage .

o    Click the clock icon  . The Determine Work Area: Entry dialog box appears.

o    Specify the value (P001) for the plant in the dialog box.

o    Click the check mark icon . The change view Storage Locations: Overview screen appears.

o    Click New Entries. The New Entries: Details of Added Entries screen appears.

o    Specify the value of the storage location and description fields.

o    Click the Save icon to save the storage location.

o    Click the Exit icon to create the storage location.

18.     How will you define a storage location?

 A storage location is defined by performing the following steps:

         Select Tools > Customizing > SAP Reference IMG > Edit Project.

         Select Enterprise Structure > Definition > Materials Management > Maintain Storage .

         Click the clock icon . The Determine Work Area: Entry dialog box appears.

         Specify the value (P001) for the plant in the dialog box.

         Click the check mark icon . The change view Storage Locations: Overview screen appears.

         Click New Entries. The New Entries: Details of Added Entries screen appears.

         Specify the value of the storage location and description fields.

         Click the Save icon to save the storage location.

         Click the Exit icon to create the storage location.

19.     How is a storage location assigned to a plant?

         You can assign a storage location to a plant either by using the transaction code OX09 or by performing the
following steps:

o    Open the SAP Customizing Implementation guide.

o    Select Enterprise Structure > Definition > Materials Management > Maintain Storage Location . The view
cluster Maintenance: Initial Screen window appears with the Determine Work Area: Entry dialog box opened.

         In the Determine Work Area: Entry dialog box, enter a plant number and click Continue. The change
viewStorage Locations: Overview screen appears where you can assign a storage location to the plant.

20.    Can storage locations be created automatically? How can they be created automatically?

Storage locations can be created automatically when an inward goods movement for a material is performed.
In order to create storage location automatically, open the SAP Implementation guide and click Materials
Management > Inventory Management and Physical Inventory > Goods Receipt > Create Storage Location
Automatically.

          3. Master Data in SAP MM

1.     What is Master data in MM module?

 The master data in the MM module acts as reference data, defining various business entities and playing a key
role in the core operation of the business.
2.      How is master data important in MM module?

The master data in the MM module contains all of the basic information needed to manage material. The data
is stored and sorted on the basis of different criteria, such as the descriptive nature of the material (size,
dimension, and weight) and the control functions of the material (material type and industry sector). Apart
from data maintained by the user, the master data also stores data that is automatically updated by the
system (such as stock levels).
3.     What are the various types of master data in MM module?

The different types of master data in the MM module are as follows:

         Material master

         Vendor master

         Purchasing information record

         Source list
         Quota arrangement

4.    What is a Material Master file?

A material master file stores and maintains all of the information related to managing a material. The material
master is sorted on the basis of different criteria.
5.    Why are material master records used in SAP?

Material master records are used in the SAP R/3 system to manage material-specific data. The material
information stored in material master records is used by all logistics areas in the SAP R/3 system. The
material master records integrate all material-specific data into a single database object that eliminates the
problem of data redundancy. Because material master records store data in a single database object, the same
data can be shared by all departments, such as purchasing, inventory management, materials planning, and
invoice verification.
6.    How is the information of material master records updated?

You can manually update the information in the material master records, however, there are some exceptions
for which the information can be updated by the SAP R/3 system only, for example, administrative data.
7.    What are the types of industry sectors defined in Material Master data?

         The different types of industry sectors defined in the material master data are as follows:

o    Aerospace and defense

o    Beverage

o    Chemical industry

o    Food and related products

o    Mechanical engineering

o    Pharmaceuticals

o    Plant engineering/construction

o    Retail

o    Retailing

o    Service providers

8.     What data in material master is maintained at the client level?

The general data, i.e., the data applicable to the company as a whole, is stored at the client level.
9.    What are the data in material master that are maintained at the company code level?

The data that is specific to a particular company and the plant and storage areas assigned to that company is
maintained at the company code level.
10.    What are the plant-specific data in material?

The MRP data and forecast data are the plant-specific data in the material master.
11.    What is the lot size attribute of a material?

         The lot size attribute represents the reorder quantity for a material. A material can have a periodic, optimum,
or static (fixed) lot size.

12.    How is material information structured in material master records?

Material information is structured in material master records on the basis of different criteria, such as the
material's master detail (including its name, size, dimension, and weight), which shows its descriptive nature,
and the material's detail related to control functions (such as material type, price control, and industry
sector). Material master records also store information about the data that can be automatically updated by
the system. For example, the stock level can be automatically updated by the system on the basis of the
material data update.
13.    What is a batch?

A batch is a group of materials combined into one quantity for various reasons. Very often, materials with the
same characteristics and values are grouped into a batch. For example, in the chemical industry, a specified
number of containers of a specific product may be considered a batch if they were produced at the same time
and have the same physical and chemical characteristics.
14.    Why is batch record important?

         A batch represents a quantity of a particular material processed at the same time with the same parameters.
These materials, produced as one batch, have the same characteristics and values, which may vary from the
materials of another batch produced on the same day.

         A batch record is important because batch records indicate that the batch conforms to the current Good
Manufacturing Procedures (GMP). The batch record also contains specific information about the product
tested, analytical methods, and test results.
 15.    How to create a batch?

You can create a batch record manually by using the transaction code MSC1N. The navigation path for creating
a batch is: SAP Menu > Logistics > Materials Management > Material Master > Batch > Create .
16.    What are the important fields in a batch master record?

         The important fields in a batch master record are as follows:

o    Production date— Refers to the date when the batch was produced.

o    Self-life expiration date— Refers to the date when the life of the batch will expire.

o    Available from— Refers to the date from which the batch will be available to other departments.

o    Batch status— Allows the batch to be classified as having restricted or unrestricted use.

o    Next inspection— Refers to the next quality inspection date of the batch.

o    Vendor batch— Refers to the batch number assigned by the vendor.

o    Class— Allows the user to sort the batch for use in specific classes.

o    Characteristics —Helps in assigning a class to the batch.

o    Release status —Specifies the status of the batch.

o    Linked document —Helps the user to link the documents related to the batch.

o    Document type —Allows the user who is purchasing the batch to specify a document.

o    Document —Helps the user to select the relevant document.

o    Document part —Allows the user to enter the part of the document that is related to the batch.

o    Version —Specifies the document version of the batch.

17.    How can batch records be changed?

         You can change a batch record by using the transaction code MSC2N. The navigation path of changing the
batch record is: SAP Menu > Logistics > Materials Management > Material Master > Batch > Change .

         It is important to note that these changes to the batch record will also be available for review.

18.    How to delete a batch?

You can delete a batch by using the MSC2N transaction code. You can alternately delete a batch record by
flagging the batch master record. For this, you need to first select the batch in the Change mode.
19.    What is Batch Information Cockpit?

The Batch Information Cockpit (BIC) is the main switching point, having a wide range of options for scrutiny
and control of batches. It stores at a single location all the information related to the analysis of a particular
batch.
20.    What are the levels at which a batch number can be configured?
 A batch number can be configured at several different levels: client level, plant level, and material level. You
can select a batch number at any of the following levels:

         Client level— When you configure a batch at the client level, you need to assign the batch number only once
throughout the whole client. Only one batch number exists for each material assigned at this level.

         Plant level —In SAP, the plant level is the default level for the batch number. At plant level, a batch number is
unique for a plant and material. This means that you can have a batch of the same number at a different plant
within the same company.

         Material level —At this level, material numbers are assigned to the products. The material number helps to
differentiate between two products in case their batch numbers are the same. The materials are identified by
the combination of the material number and batch number.

21.    How are batch numbers assigned?

The batch number is predefined in SAP. You can change the batch numbers either by using the OMAD
transaction code or by using the navigation path IMG > Logistics-General > Batch Management > Batch Number
Assignment > Maintain Internal Batch Number Assignment Range .

Follow either of the two configuration steps to change the batch number:

         You can assign a batch number internally using the internal number range, either by using the OMCZ
transaction code or by following the navigation path Display IMG > Logistics-General > Batch Management >
Batch Number Assignment > Activate Internal Batch Number Assignment > Activate Batch Number
Assignment.

         You can also configure the system to allow automatic numbering of a batch by following the navigation
path Display IMG > Logistics-General > Batch Management > Batch Number Assignment > Activate Internal
Batch Number Assignment > Internal Batch Number Assignment for Assigned Goods Receipt .

22.    What is a serial number?

A serial number is assigned to an item to identify it and to store information about it. A serial number is
mostly used to refer to equipment such as motors, drills, or vacuums. In MM, an item of material contains a
serial number as well as a material number. This combination helps to uniquely identify an item of material.
23.    What is a class type? How will you configure a class type?

         A class type is the SAP system's top-level unit, which is used to control the SAP system's classes. It
performs the following tasks:

o    Defines the class objects

o    Checks if class objects can be used in other classes or not

o    Defines the class maintenance screen

         You can configure a class type by using the following menu path: SAP Customizing Implementation Guide >
Cross Application Component > Classification System > Classes > Maintain Object Types and Material Types .

24.    A material does not have a master record. How can we procure that?

There may be instances when a material does not have a master record. You can perform different functions
in different situations to procure the master record. For example:

         You can create a material master record if there is no material master record for a particular material.

         You can extend the material master record if the material master record exists for a particular material but
the user department does not have the master data.

         You can also extend the material master record if the material master record exists for a particular material
and the user department has the master data but it has been entered in a different organizational level.

25.    State the importance of classification data.

Classification data allows you to search for materials on the basis of the characteristic values entered into
the classes. This feature is very useful when the customer wants to search for a particular vendor and
particular batches.
26.  What is an ABC indicator?

An ABC indicator is an indicator assigned by the ABC analysis procedure. An ABC indicator provides details of
the consumption value of the material involved in the ABC analysis. The ABC analysis is performed by
multiplying the current price of the materials by their quantity. The different consumption values are given as
follows:

         A materials—Important parts, high usage/consumption value

         B materials—Less important parts, medium usage/consumption value

         C materials—Relatively unimportant parts, low usage/consumption value

27.    What are the main master files used in MM?

The following are the main master files used in MM:

         Material master file

         Inventory master file

         Vendor master file

28.   Give some example of master data in material management (MM).

Material master, material master general data (MARA), tax Classification material (MLAN), info records,
source list, and vendor master are examples of master data in MM.
29.   How is the vendor created?

You can create a vendor by using the transaction code XK01 and performing the following steps:
         Add the vendor name, company code, purchasing organization, account group, and vendor address.

         Add the country, bank key, bank account, and the name of the account holder.

         Save the data.

         This creates a vendor record in the system.

30.    What is vendor master data?

Vendor master data contains details of each vendor that supplies materials or services to an enterprise. The
vendor master data is stored in individual vendor master records consisting of data, such as the vendor's
name, the vendor's address, the currency used for the transaction, payment terms, and the contact person's
name (on the sales staff).
31. What are the different sections in vendor master data?

 Following are the three sections in vendor master data:

o General data— Provides general information about the vendor that can be entered into the
system for creating vendor records. General data can provide the name, address, telephone, and fax of the
vendor through specified search terms. Additional information can also be added to the vendor master record
by the accounting and purchasing departments using the transaction code XK01.

o Accounting data —Refers to financial information entered at the company code level. The
financial information includes tax information, bank details, reconciliation account, payment terms, payment
methods, and dunning information. You can enter this financial data using the transaction code FK01.

o Purchasing data —Refers to data entered while creating a vendor at the purchasing organization
level. Different purchasing organizations have different purchasing data. The purchasing data includes partner
functions, purchasing default fields, and invoice verification indicators. You can enter this data using the
transaction code MK01.

32. What are the different fields in vendor master data?

 The different fields in vendor master data are as follows:

o The name and address of the vendor

o The currency in which the transaction will be done

o The terms and conditions of payment

o The names of important contact persons

o The accounting information, such as the reconciliation account in the general ledger

33. How do we create a vendor number range?

 When you create a number range, it is important to remember that vendor numbers, such as material
numbers, can be assigned externally or internally. You can create vendor number ranges by selecting the
following navigation path: IMG > Financial Accounting > Vendor Accounts > Master Data > Preparations for
Creating Vendor Master Data > Create Number Ranges for Vendor Accounts .

 For configuring the vendor number range, you should enter a unique number for the range, which is a
two character field, and then specify the limit for the number range. The current number field is used to
define the current number. The Ext. field Specifies whether the number range is defined externally by the
user.

 34. What is dunning procedure? How can it be configured?

 Sometimes, you may need to send a payment reminder or a dunning notice to a person or an organization
to remind them of their outstanding debts. The process by which the system controls dunning is called dunning
procedure. Dunning procedure can be configured by using the FBMP transaction code or the following
navigation path: IMG > Financial Accounting > Accounts Receivable and Accounts Payable > Business
Transactions > Dunning > Dunning Procedure > Defining Dunning Procedures .

 35. How do we assign material to vendors?

 Select the following navigation path to link vendors to materials: SAP Menu > Logistics > Material
Management > Purchasing > Master Data > Info Record > Create . Alternatively, the ME11 transaction code is
used for this purpose.

36. What is the transaction code to access the Materials Management Configuration menu?

 The OLMS transaction code is used to access the Materials Management configuration menu.

37. What are the various transaction codes to access the MM configuration?

 The following are the various transaction codes to access the MM configuration:

Transaction Description
Code

OLMD Accesses Material Management-Consumption Based

Planning (MM-CBP)

OLMB Accesses Material Management-Inventory

Management (MM-IM)

OLME Accesses Material Management-Purchase (MM-PUR)

OLML Accesses Material Management-Warehouse

Management

OLMS Accesses the material master data

OLMW Enables valuation and account assignment

38. Write the names of some important MM tables

 The following table lists the important MM table names:

 Table Purpose
Name

EINA Used for general data of the (purchasing) information

record

MARC Used in plant data for materials

EINE Used for purchasing organization

MAST Used for bills of material (BOM) link

MKPF Used for header material document

MAKT Used for material description

MARD Used in storage location data for material

MARA Used for general materials data

MBEW Used for material valuation

39. What are purchasing information records?

 Purchasing information records, also known as info records, contain information related to the material
and the vendor who is supplying the material. They also contain details about the material, such as the current
price.

40. What are the categories of purchasing information records?

 The categories of purchasing information records are as follows:

o Standard—Contains information for the standard purchase order. In this type of purchasing
info record, you can create info records for materials and services that do not have master records.

o Subcontracting —Contains ordering information for subcontract orders.

o Pipeline— Contains information on commodities that are sent through a pipeline, such as oil or
water.

o Consignment— Contains information on materials that are in the vendor's possession and are
kept by the vendor at some other premises at his own cost.

41. What are the prerequisites for creating a purchasing info record?

 The prerequisites for creating a purchasing info record are as follows:

o Material number —Before creating a purchasing info record, the material number of the
material master record should be known.

o Manufacturer part number (MPN) material number —Before ordering a material that has an
MPN, you must know its MPN material number.
 o Vendor number —You should also know the number on the vendor master record.

o Organizational level —If the purchasing info record is for a particular purchasing organization
or plant, then the code specific to that purchasing organization or plant is required.

42. How can we create a purchasing information record?

 You can create a purchasing information record either manually or automatically by setting the Info
Update indicator when maintaining a quotation, a purchase order, or an agreement.

43. Can a purchasing info record be created without a material number?

 Yes, you can create a purchasing info record without a material number. If the material does not have a
material number, you will need the following information to create the purchasing info record:

o Material short text

o Order unit

o Material group

o Short term key

44. How can we create an information record based on the material master?

 First, you need to create the info record by selecting SAP Menu > Master Data > Info Record > Create.
Enter details such as vendor number, material number, purchase organization, or plant number. Then enter the
number of the information record (in case of external assignments). Next, enter the general data for vendors,
ordered quantity, origin of data, supplying information, and customs tariff number. Then enter the planned
delivery time, purchasing groups, and standard purchasing quantity. Check the control data and take the
default value of tolerance data and the purchasing group from the material master record. Finally, enter the
net price and then select Go To > Texts to display the text overview. If the PO text is already defined, it
appears in the material master record; otherwise, it needs to be entered. After all these entries have been
made, the record is saved.

45. What is the document management system (DMS) in SAP?

 The DMS in SAP helps you store external documents, such as pictures of the goods or material. By
using the DMS, you can set the maximum size of the picture that can be uploaded in a document. The DMS
helps to link these external documents with the appropriate SAP objects.

   4. Procurement and Purchasing in sap mm

1.     What are the special stocks used in MM?

 Special stocks are stocks that are managed separately regardless of whether they belong to your
company. The company manages a material by using a data record, which contains all the required information.
The different types of special stocks are as follows:

o Sales order stock

 o Returnable packaging with customer

o Consignment stock at customer

o Vendor consignment stock

o Returnable transport packaging

o Subcontracting

o Pipeline

2. What are the differences between company-owned special stocks and externally-owned special stocks?

                     The differences between company-owned special stocks and externally-owned special stocks are listed
in the following table:

Company-Owned Special Externally-Owned Special

Stocks Stocks

Stocks that belong to the Stocks that belong to the

company but are stored with wholesaler or the customer but
the wholesaler or the are stored at the company are
customer are called company- called externally-owned special
owned special stocks. stocks.

Company-owned special stocks Externally-owned special stocks

are managed at the production are managed at the place where
level. they are stored.

3.    Why is negative stock needed in an organization?

Organizations need negative stock when a material is shipped to a customer and production is not confirmed or
there is not enough stock to satisfy the requirement. The system still allows the issuing of the material, and
inventory shows a negative quantity of stock until the production of the material is confirmed.
4.    What are special procurement types?

In a normal purchasing system, the customer purchases the goods from the wholesaler/retailer and the
possession of the goods transfers from the wholesaler/retailer to the customer. This might not be the case
with special procurement types, where the transfer of goods may not necessarily be from the
wholesaler/retailer to the customer directly. For example, you might order a good for a friend of yours, who,
in turn, purchases the good from the wholesaler/retailer and then transfers the good to you. The friend is the
third party involved in this process. Therefore, the possession of the good indirectly transfers to the
customer. This type of procurement is called the special procurement type. The special procurement type
defines the external procurement or in-house production of the material. The following list shows the special
procurement types available in the SAP system:

         Consignment
         Subcontracting

         Stock transfer using the stock transport order (STO)

         Production in another plant

         Third-party processing

         Returnable transport packaging

         Pipeline handling

5.    Define consignment stock. What are the main features of consignment stock?

Consignment, in a general sense, is the act of holding the ownership of materials but storing the materials at
some other premises until the materials are sold or shifted somewhere else. The stored materials are known
as consignment stock in the SAP system. Therefore, stock that is stored at the customer's premises but is
the supplier's property until the stock is transferred to the customer's stock list is called the consignment
stock. The main features of the consignment stock are as follows:

         You can combine the consignment stock with your available stock at any point in time.

         You can evaluate the consignment stock in any currency.

         The price of the consignment stock fluctuates. This means that you can determine the price of the
consignment according to the market conditions.

         You can price the consignment stock in any unit.

         You can use different features of purchasing, such as discounts, in the consignment stock.

         The consignment stock is evaluated at a price quoted by different vendors.

6.    How is the pricing of consignment stocks done? What information does consignment info  record contain?

         Prior to ordering a material from a vendor or posting a goods receipt to the consignment stock, you need to
obtain the consignment price. If the consignment material is ordered from several vendors, the system
maintains the consignment stock of each vendor separately. The reason the system maintains the consignment
stock separately is that the price of the consignment stock may vary from one vendor to another.

         The consignment information (info) record contains the consignment price required for the purpose of
material valuation and accounting.

7.     How are the consignment stocks created?

Consignment stocks are created in the normal purchase order (PO) or requisition, but the main thing to
consider is that you must enter the K category for the consignment item. As a result, the goods issued are
posted to consignment stores and the invoice receipt is not generated.
8.     Define the consignment cycle?
         Consignment cycle is similar to the purchase cycle, except that when you create goods receipts of the
consignment stocks, only quantity (QTY) is updated and no accounting documents are created. Once the goods
are utilized, consignment is settled. The value of the consumed or issued consignment stocks is taken from the
active purchase info record.

9.     How is consignment material procured?

Consignment material is procured through purchase requisitions, POs, and outline agreements.
10.    How can we see the consignment stocks in SAP?

You can see the consignment stocks in SAP by using the following functions:

         Display consignment info record

         Display the stock overview

         Display consignment stocks

11.    How can we take consignment stocks into our own stock?

You can take consignment stocks from the vendor into your own stock by performing the following steps:

         Select Goods Movement > Transfer Posting to display the initial screen.

         Enter the plant name and the location where you want to store the materials.

         Select Movement Type > Transfer Posting > Consignment > Consignment to Own .

         Select Continue to display the collective entry screen.

         Enter the name of the vendor, the materials, and the quantity of materials.

         Enter the receiving storage location if you want to store the materials in another storage location.
         Post the document. This makes the vendor liable to change the storage location of the materials.

12.    Can we do the physical inventory check of consignment stocks?

Yes, you can do the physical inventory check of consignment stocks. To do the physical inventory check,
perform the following operations:

         Create a physical inventory document

         Enter the physical inventory count

         Post the inventory differences

13.     How can you do invoicing in case of consignment stocks?

You can invoice in the case of consignment stocks by performing either of the following:

         Invoice with PO
         Invoice without PO

14.    What do you mean by subcontracting?

Subcontracting can be defined as the processing of materials by an external supplier.

15.    How is subcontracting used in case of MM?

Subcontracting is the process by which the vendor receives the materials to produce the end product.
Subcontracting involves the following procedures:

         You order the end product by using the subcontract order. The components that the vendor needs to
manufacture the end product are mentioned in the PO.

         During the inventory management process, the components are posted to the stock of material provided to
the vendor. Later, the components are supplied to the vendor.

         The vendor then processes the service and delivers the materials ordered. The consumption of the
components is posted.

         If, after posting the goods receipt, the vendor notifies you that the quantity of the components actually
consumed is different than planned in the PO, you must make an adjustment.
         The vendor then charges for the service, for which the invoice is posted in Invoice verification.

16.    What information does the subcontracting info records contain?

A subcontracting info record consists of ordering information related to subcontract orders. For example, if
you entered into a contract with an outside source for the assembly of a component, the subcontracting info
record would contain the price specified by the vendor for the assembly work.
17.   How do we create subcontracting PO?

         Perform the following steps to create a subcontracting PO:

o    Enter the material to order and the category of the item for subcontracting (L) in the order item.

o    Press the Enter key to display the screen for component processing.

o    In the component processing screen, enter the components required by the vendor to manufacture the ordered
material (end product). When entering the components, you need to take care of the following points:

o    You do not need to enter the date required for the components. The system proposes this date when you press
the Enter key. It is calculated as follows:

  Delivery date of the item (planned delivery time)

o    If you do not wish the quantity of the components to be altered, even if the order quantity of the end product
is changed, then set the indicated field to fixed quantity.

o    If you want to allocate a particular batch of the component to the vendor for the manufacture of the ordered
material, enter the desired batch.
o    To determine whether or not the components are available on the date required, select Component List >
Component Availability.

o    When you enter a bill of material as the material in the subcontract order, the components are automatically
created.

o    You can also determine the components in the bill of material at a later date (for example, if the bill of
material is subsequently changed) by selecting Item > Go to > Components > New BOM Explosion. The existing
entry of the components is removed and again determined in the bill of material.

o    Save the PO.

         When you print the PO, the components are printed per order item.

18.    How can we view the stocks provided to vendor?

The stocks of material provided to a vendor can be viewed by using the SC Stock Monitoring for Vendor
report. The report can be accessed by selecting Purchase Order > Reporting > SC Stocks per Vendor from the menu. With this report, the
current status of the stocks, planned issues, and planned receipts can be viewed.
19.    How are components (materials) provided to vendor?

The components, or rather the quantities of the components required to manufacture the end product, are
provided in the stock of material to be provided to the vendor. The stock of material provided to the vendor is
the total valuated stock that is available for MRP. The total valuated stock is managed at the plant level, at
the site of the vendor. This stock can be either an unrestricted-use or quality-inspection stock. The
unrestricted-use stock refers to the valuated stock of a material that is owned by the company and does not
have any restrictions on its usage. The quality-inspection stock is intended to be used only for quality
inspection. The components can be provided to a vendor in the following ways:

         Posting the components from the unrestricted-use stock

         Receiving the components from another vendor

20.   How are components consumed in case of subcontracting?

In subcontracting, the end product is ordered by using a subcontract order. The materials or components
required by the vendor to manufacture the end product are mentioned in the PO. The components are posted
to the stock of the material provided to the vendor during inventory management. When the components are
supplied to the vendor, the vendor manufactures the end product and delivers it. At this point, the goods
receipt is posted with a reference to the subcontract order. The goods receipt also contains the posting of
the consumption of the components from the stock of material provided to the vendor. If the components
consumed by the vendor are more or less than that specified in the PO, an adjustment needs to be posted to
correct the consumption of components.

  5. Inventory Management in SAP MM

1.      Give an overview of Inventory management in SAP system?

 Inventory management in the SAP system helps record and track stocks of materials. It also involves the
planning and documentation of all goods movements. .
2.    What tasks are covered under Inventory Management?

Inventory management is an important part of materials management (MM). Optimal inventory management not
only ensures an uninterrupted supply of the material at the required time, but also prevents wasting items. MM
covers the following tasks:

         Material stock management

         Planning, entry, and documentation of goods transfers from and to the inventory

         Physical stocking of items

3.    What is Physical Inventory?

         Physical inventory is a process in which all the transactions related to the movement of goods are stopped and
the company physically counts inventory. It is required in financial accounting rules or for placing an accurate
value on the inventory for tax purposes.
4.    What are the initial configuration steps for physical inventory?

The steps for purchase acquisition are as follows:

         Defining the default values for the physical inventory document

         Reporting batch inputs

         Recording tolerances for physical inventory differences

         Inventory sampling as well as configuration of cycle counting

5.    What is the difference between managing stock by quantity and managing stock by value?

         Transactions that make changes in the stock result in stock updates that are recorded in real time. At any
point in time one can view the stock overview, which represents the current situation at that time. That is the
essence of stock management by quantity, and can applied to the following stock types:

o    Located in the warehouse

o    Ordered but not yet received

o    Located in the warehouse and reserved for a particular purpose

o    Reserved for quality inspection

         The managing stock by value option reviews the stock materials qualitatively rather than quantitatively. The
valuatioNof stock is done either at the plant level or at the location level. Updates that can be done when
managing stock by value are as follows:

o    The quantity and value for the goods movement

o    The accounts that are assigned for cost accounting

o    The G/L accounts for financial accounts, with automatic assignment of accounts

         The valuation area is the organizational level at which the stock value is maintained. It can be either at plant
level or storage level.

6.    What are the special stocks in SAP?

Special stocks are defined as stocks that must be managed separately by a company. They can be either
company owned or external stocks. They can be categorized as follows:

         Consignment

         Subcontracting

         Stock transfer using stock transport order

         Third-party processing

         Returnable transport packaging

         Pipeline handling

         Sales-order stock

         Project stock

7.    With which modules in SAP is the inventory management integrated?

Inventory management is an important part of the SAP MM module. The business activities of an organization
revolve around the inventory of materials, which serves as the input for the manufacturing process or the
inventory of prepared goods for delivery or sale. The material is purchased from the appropriate vendors on
the basis of requests from the materials requirement planning (MRP) module. The delivered items are
recorded as the goods receipt in inventory management. The materials are then stored, either for delivery to
the customer or for manufacturing processes. Inventory management is integrated with other modules, such
as financial accounting (FI), sales and distribution (SD), production planning (PP), project system (PS), and
quality management (QM).
8.    How is the inventory management integrated with MM?

         Inventory management is directly linked with the MM module because any movement of goods to and from
inventory happens under the MM module. MRP, purchasing, and invoice verification are some of the MM
components that are also linked with inventory management. After material is ordered it is posted as a goods
receipt with reference to the purchase order. The actual data of the quantities are checked in the vendor's
invoice.

9.    What are the initial configuration steps for inventory management?

The steps for inventory management are as follows:

         Defining plant parameters

         Defining system message attributes

         Defining number assignment

         Defining goods issue, transfer posting, screen layout

         Maintaining copy rules for reference documents

         Setting up dynamic availability checks

         Confirming the negative items

10.    What is Goods movement? What type of documents is created after goods movement?

Goods movement refers to the movement of stock. This movement of stock could be either inbound from the
vendor, outbound to a customer, between different plants, or even between different stocks within a plant.
After goods movement, the SAP system creates two types of documents: material documents and accounting
documents.
11.    What are the goods movements that take place in MM?

The goods movements can be defined as the physical or logical movements of materials that lead to a change in
stock levels or results in material consumption. The goods movements are part of the MM policy. The goods
movements in SAP are as follows:

o    Goods receipt— Represents the physical movement of goods or materials into the company. It increases the
stock quantity. The goods receipt can be of the following types:

  Goods receipt with reference to a purchase order

  Goods receipt with reference to a Production order

  Goods receipt without reference

o    Goods issue— Represents the physical movement of goods or material ouTof the company. It reduces the
stock quantity. The goods issue can be of the following types:

  Goods consumption in the company

  Goods delivery to customers

o    Stock transfer— Represents the movement of materials from one location to another location. The locations
can be either within the same plant or different plants.

o    Transfer posting— Represents the stock transfer that can either be physical or logical. In logical stock
transfers, goods are transferred only in records, while the actual stock transfer does noToccur. Some
examples of physical stock transfer are:

  Stock transfer between two storage locations in a plant

  Stock transfer between two plants

  Transfer of materials to customer consignment stock

         Some examples of logical stock transfer are:

o    Release of materials from stock in quality inspection

o    Transfer of materials from vendor consignment stock to own stock

o    Batch splitting

o   Transfer posting material-to-material

12.    What is Goods Receipt & Goods Issue?

         Goods receipt is the process that enables the receipt of material from a vendor or from the in-house
production process. There are other types of goods receipts in SAP that include initial stock creation. The
goods receipt process also increases stock due to one of the following processes:

o    Receipt of production order

o    Receipt of purchase order

o    Initial inventory entry

o    Others

         Goods issue is a process in which the stock in the warehouse is reduced due to any of the following reasons:

o    Shipment to a customer

o    Stock withdrawal for a production order

o    Return of materials

o    Material required for sampling

o   Scrapping of materials

13.    Why is goods receipt important to a company?

Goods receipt indicates a receipt or inward movement of stock of materials or goods. When an external vendor
provides stock to the company, the goods receipt is generated as a purchase order, and when the material is
produced in-house, the goods receipt is generated as a production order. A goods receipt is important to a
company because using a goods receipt moves material into stock, updates the stock levels, and thereby
indirectly enables the production process.

14.    How is a goods receipt performed?

         The steps to perform a goods receipt are as follows:

o    Enter the header data.

o    Select the movement type and the purchase order number.

         The document is posted in the database.

15.    How do you post the goods if the PO number is not known?

If the purchase order number is not known, you must enter search criteria for the purchase order in the
initial screen. As a result, the list of purchase orders is displayed. The desired purchase order items can then
be copied.
16.    How is the vendor returned processed without a purchase order reference?

         You first need to observe the Return column and then select Item Detail > MIGO_GR > Goods Receipt for
Purchase Order. If the intention is to deduct the stock, then movement type 161 is used; otherwise, 162 is
used to undo the changes. Lastly, you must ensure that the document is a return purchase order. The
document is then saved.

         Alternatively, you can use the M21N transaction code for this purpose.

17.    What happens when a goods receipt is posted?

While posting a goods receipt, the following events occur:

         The material document is created.

         The accounting document is created.

         Three printed versions of goods receipt notes are modified.

         The stock level changes.

18.    What is the result of goods movement?

The following events are initiated when goods movements take place:

         First, a materials document is generated, which is proof of the goods movements.

         Accounting documents are generated if the movement of goods requires a change in the financial accounts.

         The stocks of the materials quantities are updated.

         The stock values in the material master are updated.

         Financial and material documents are updated.