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SAP ERP EnterpriseResourcePlanning is commercial software that will integrate all information altogether in
a single software considering various factors like time and cost. Organizations can easily meet their business
demands with the help of SAP.

SAP Business Process

SAP MM is known as SAP Material Management system. SAP MM role in business process is as follows:

A business process in SAP is termed as “Module”.

SAP Materials Management MM is a part of Logistics area and helps to manage the
procurement activity of an organization from procurement.

It supports all aspects of material management planning, controletc.

It is the backbone of the Logistics area which incorporates modules like Sales and
Distribution, Production Planning, Plant Maintenance, Project Systems, Warehouse
Management which are extremely obsessed on Materials Management module.

Features of SAP MM
The features of SAP MM system are as follows:

SAP MM is one of the modules of SAP that deals with material management and inventory
management.

Material Management process ensures that there is never a shortage of materials or any gaps in the
supply chain process of the organization. SAP MM speeds up the procurement and material
management activities making the business run smoother with complete time and cost efficiency.

It deals with managing the materials productsandorservices resources of an organization with the aim of
accelerating productivity, reducing costs and increase improvement and at a similar time be versatile to
accommodate changes in day to day life.

It deals with the Procurement Process, Master Data , Account

Material & Vendor
Master

Determination & Valuation of Material, Inventory Management, Invoice Verification, Material Requirement
Planning etc.

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The first step to understand SAP is to have basic knowledge of screens like Login screen, Logout screen and
so on. Following screens will describes about the screen navigation and the functionalities of standard tool-
bar.

Login Screen
Log on to SAP ERP server. SAP login screen will prompt for User ID and Password. Provide the valid user ID
and Password and press enter. The user id and password is provided by system administrator. Following is the
login screen:
Standard Tool-bar Icon
SAP screens tool-bar are shown in the following image:
SAP screen tool-bars are briefly described as:
Menu Bar - Menu bar is the top line of dialog window in the SAP system.

Standard Toolbar - Standard functions like save, top of page, end of page, page up, page down, print,
etc. are available in toolbar.
Title Bar - Title Bar displays the name of the application/business process you are currently in.

Application Toolbar - Application specific menu options are available on this toolbar.

Command Field - To start a business application without navigating through the menu transaction, some logical
codes are assigned to the business processes. Transaction codes are entered in the command field to directly
start the application.

Standard Exit Keys

Exit keys are used to exit the module or to log off. They are used to go back to the last accessed screen.
Following are the standard exit keys used in SAP:

New Session Icon

For creating a new session we use the following keys shown in the below image:
Log Off
It is a good practice to log off from the SAP system when you finish your work. There are several ways of
login off from the system but it can be done using following instructions as shown in image:

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Every organization acquires material or services to complete its business needs. The process of buying
materials and obtaining services from vendors or dealers is procurement. Procurement process should be
done in such a way that it is ordered in correct quantity, with a proper value at the proper time. It is subdivided
into following parts:

Basic Procurement

Special Procurement

Basic Procurement
It is a process of acquiring goods or services in the right amount, at the right price at the right time. So the
method of getting services, supplies, and equipment from a vendor seller, at the right price at the right time in
right amount is termed as Procurement. The quality of procurement is attempting to “get the right balance”,
consider the following example:

Organizations try and keep inventory levels at a minimum due to the prices associated with high levels of
inventory; however at identical time it is very expensive to prevent production due to shortages in raw
 materials.

Getting the minimum price for a product or service is often necessary, however the balance between
product availability, quality, and vendor seller relations is also necessary.

Procurement Lifecycle
Most modern organizations procurement follow some sequential steps which are described below:

Requirement and Information Gathering

Procurement process starts with gathering information about product and its quantity. Then for required
products and services, it is necessary to look for suppliers who can satisfy the requirements.

Supplier Contact
After gathering requirements one will look for the suppliers who can fulfill the requirements. Based on that
quotation request or information request can be made to suppliers or direct contact can be made with them.

Background Review
Once the supplier is known product/service quality is checked, and any necessities for services such as
installation, warranty and its maintenance are investigated. Some samples of the products can be obtained for
quality examination.

Negotiation
Some negotiations with suppliers is made regarding price, availability and delivery schedule of the
products/services. After this a contract is signed that is a binding legal document between supplier and ordering
party. A contract will include all necessary information like price and quantity of material, delivery date, etc.

Order fulfillment
Ordered material will be shipped, delivered to the ordering party and supplier is paid accordingly. Training and
Installation of product or services may also be included.

Consumption, Maintenance and Disposal

As the products/service is consumed the performance of the products or services is evaluated and any follow up
service support if required is analyzed.

Contract Renewal
Once the product or services are consumed or contract expires and needs to be renewed, or the product or
service is to be re-ordered, company experience with vendors and service provider is reviewed. If the products
or services are to be re-ordered, the company decides whether to order from previous supplier or think about
new suppliers.

Basic Procurement Activities

Basic Procurement activities flow is given in the following image:
A brief introduction of Procurement activities is given below:

Procurement Invoice verification/ Vendor Payment

Activities Description

Determination of requirement
It is the logical subdivision where it is determined that
what material or services are required to company, and
Creating Purchase Requisition which supplier can fulfill the requirement.

It is the phase in which purchasing department is

Creating Purchase Order informed about the requirement of items or services
required for business purpose. A requisition is a internal
Goods receipt/ document.
Invoice Received
It is the phase when order is created from requisition and
it is approved and assigned to a supplier.
It is the phase in which the material is received by the It is the phase in which the vendor seller is paid from the
company and the condition and quality are verified. In company and reconciliation of the invoice and PO is
this phase Invoice is received from the vendor seller. accomplished.

Type of Basic Procurement

There are 2 types of Basic procurement which are shown below:

Procurement for Stock vs Consumption

External vs Internal Procurement

Procurement for Stock vs Consumption

The following points show the difference of Procurement for Stock vs. Consumption:

Procurement for Stock - A stock material is a material that is kept in stock. These materials are kept in
stock once received from the vendor. The stock of this material keeps on increasing or decreasing based
on amount of the quantity received or issued. To order a material for stock, the material must have a
master record within the system.

Procurement for Direct Consumption - When procurement is for direct consumption i.e. it will be
consumed as soon as it is received, the user should specify the consumption purpose. To order a material
for consumption, the material may have a master record within the system.

External vs Internal Procurement

The following points show the difference of External vs Internal Procurement:

External procurement - It is the process of procuring goods or services from external vendors.
There are 3 basic forms of external procurement generally supported by the Purchasing component
of IT system.

One time orders are generally used for material and services that are ordered irregularly.

Longer-term contracts with the subsequent issue of release orders - For materials that are being
ordered regularly and in large quantities, we can negotiate deal with the vendor seller for pricing or
conditions & record then in a contract. In a contract you also specify the validity date.

Longer-term scheduling agreements and delivery schedules - If a material is ordered on an

everyday basis and is to be delivered according to an exact time schedule, then you set up a scheduling
agreement.

Internal Procurement - Large corporate organizations may own multiple separate businesses or
companies. Internal Procurement is process of getting material and services from among identical
company. So, each of these companies maintains a complete bookkeeping system with separate
Balance, Profit & Loss Statements so that when trade occurs between them it will be recorded.

Special Procurement
Special stocks are stocks that are managed differently as these stocks did not belong to company and these
are being kept at some particular location. Special procurement and special stocks types are divided into the
subsequent areas.

Consignment Stocks
Material that is available at our store premises, however it still belongs to the vendor seller/Owner of the material.
If you utilize the material from consignment stocks, then you have to pay to the vendor.

Third-party processing
In third-party processing, a company passes on a sales order to associate external vendor seller who sends the
goods directly to the customer. The sales order is not processed by your company, however by the vendor
seller. Third-party items can be entered in purchase requisitions, purchase orders and sales orders.

Pipeline handling
In pipeline handling, the company needs not to order or store the material involved. It is obtainable as and
when required via a pipeline forexample, oilorwater, or another style of cable suchaselectricity. The material
that is consumed is settled with the vendor seller on a regular basis.
Returnable Transport Stock
The company orders goods from a vendor seller. The goods are delivered with returnable transport packaging
pallets, containers that belongs to the vendor seller and is stored on the customer premises until they return it to
the company.

Subcontracting
The vendor thesubcontractor receives components from the ordering party with the help of which it produces
a product. The product is ordered by your company through a purchase order. The components required by
the vendor seller to manufacture the ordered product are listed in the purchase order and provided to the
subcontractor.

Stock transfer using stock transport order

Goods are procured and supplied within a company. One plant order the goods internally from another plant
receivingplant/issuingplant. The goods are procured with a special type of purchase order - the stock transport
order. You'll be able to request and monitor the transfer of goods with a stock transport order.

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Organization structure is the framework of company according to which business is conducted in every
company .Organization structure consists of many levels which have relationship to one or another.
Organization structure is also referred as enterprise structure. Enterprise structure is made up of many
organizational units having relationship with one another.

SAP Implementation Guide

When client purchases SAP it comes in a CD in form of software. When SAP is first installed, SAP has its
standard set up that needs to be configured according to the need of client i.e. organization.

Configuration of SAP software like add fields, to change field names, to modify drop down lists etc. to adjust
according to working of your organization is done through implementation guide known as IMG. IMG is where
we define enterprise structure and other settings that are required for functioning of SAP software according to
need of an organization.

SAP IMG Path

To do any type of configuration according to our organization need the first step is to reach the
implementation IMG guide screen. We can reach implementation guide in 2 ways:

Menu path

Transactional code

Menu path
We can navigate through the following path to reach out to IMG:

SAP Easy Access => Tools => Customizing => IMG => Execute Project
Transactional code
Best and simple way to reach out any SAP screen is TCode i.e. transactional code. Transactional code to reach
out IMG: SPRO SAPProjectReferenceObject. Enter the Transaction code in command field and then click on
enter.
SAP IMG
IMG screen can be reached out just by following the below steps:

After SPRO, on the next screen click on SAP Reference IMG.

Next Screen will appear as follows. This is the final screen from where we can do configurations.
Menu path for MM Configuration
The main menu paths for MM area are as follows:

SAP Customizing Implementation Guide IMG => Enterprise Structure => Definition SAP Customizing

Implementation Guide IMG => Enterprise Structure => Assignment SAP Customizing Implementation

Guide IMG => Logistics => General => Material Master SAP Customizing Implementation Guide IMG

=> Materials Management

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Every organization has some framework or some structure is defined according to which the whole business
runs. Enterprise structure is the structure that represents an enterprise in SAP ERP system. It is subdivided into
various organizational units which for legal reason or business related reason are grouped together.

Enterprise structure defines various levels in an organization. These levels are placed according to some
hierarchy. Each level has some specific functionality associated with it, which in a combined way describes the
working of an organization. Also enterprise structure defines various organizational units that are present in an
enterprise. The Organizational Structure in MM consists of following Organizational Levels:

Client

Company Code

Plant

Storage Location

Purchasing Organization

Purchasing Group

Following diagram is one such organizational structure which describes the levels incorporated in an
organization. Client being at the topmost, followed by multiple company code, followed by multiple plants, plants
having multiple storage location with their own or centralized purchasing organizations.

Client
The fundamental explanation of Client is as follows:

Client is a commercial organizational unit in R/3 system.

It has its own set of master data with independent table sets.

According to hierarchy, Client is at highest level in SAP system.

Data that is maintained at client level is valid for all organizational levels.

Company Code

The fundamental explanation of Company Code is as follows:

Within Client, Company code is the independent accounting unit.

 It is a legal entity that has its own profit, loss and balance statement.

It is the smallest unit in organization for which a complete independent account set can be replicated.

Plant
The fundamental explanation of Plant is as follows:

Plant is an organizational unit within a company where activities take place. A plant will produce
goods and makes goods available for the company.

It is unit having manufacturing facility, warehouse distribution center or a regional sales office within
logistic. It subdivides an enterprise in different aspects.

Storage Location
The fundamental explanation of Storage Location is as follows:

Storage location is an organizational unit which actually differentiates between different material
stocks in a Plant.

Storage location is a place where stock is kept physically.

Plant can be consisting of multiple storage location. All data is stored at storage location level for a
particular storage location.
Purchasing Organization
The fundamental explanation of Purchasing Organization is as follows:

Purchasing Organization is an organizational unit under company or plant which is responsible for
procurement activities according to requirements. It is responsible for external Procurement.

Purchasing organization can be at client level i.e. centralized purchasing organization.

Purchasing organization can be at company or plant level i.e. company specific or plant specific

Different forms of purchasing can be described as follows:

Centralized Purchasing
Purchasing organization is not assigned to any company code it procures for all company codes belonging to
different client.

Company specific Purchasing

Purchasing organization is assigned to a company code only, Plant belonging to the company code can
purchase through this Purchasing organization.

Plant specific Purchasing

Purchasing organization is assigned to a Plant, only this specific Plant can purchase through this Purchasing
organization.

Purchasing Group
The fundamental explanation of Purchasing Group is as follows:

Purchasing group is an organizational unit which is responsible for everyday procurement activities
within an organization.

It is a buyer or group of buyer responsible for procurement activities in a purchasing

organization.

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OORRGGAANNIIZZAATTIIOONNAALL SSTTRRUUCCTTUURREE
As discussed organization structure is the framework of company which describes the entire structure and
functioning of a company. Organization structure is designed in a way that it is split into different levels and each
level is placed according to hierarchy. These levels have relationship to one another. The various levels in a
standard organization are as follows:
 Company

Company code

Plant

Storage Location

Purchasing Organization

Purchasing Group

All the Definitions in SAP will be done through Display IMG screen as shown below: Path to

reach Definition: IMG => Enterprise Structure => Definition

Create Company
Company is the topmost organizational unit after client which incorporates individual financial accounting
statements of several company codes. A company can have many company codes. In SAP it is optional to
create company. Following steps will take you through the procedure of creating company.

Path to Create Company:

IMG => Enterprise Structure => Definition => Financial Accounting => Define Company TCode: OX15

On display IMG screen select Define Company execute icon by following the above path.
Select New Entries icon.

Fill in all necessary details like name of company, address of company with street number, city, country and
postal code. Click on save icon. A new company will be created.
Create Company Code
A company code is the smallest organizational unit after company for which stand-alone financial accounting's,
profit and loss statements can be withdrawn. Many company codes can be assigned to one company. Following
steps will take you through the procedure of creating company code:
Path to create Company Code:
IMG => Enterprise Structure => Definition => Financial Accounting => Edit, Copy, Delete, Check Company Code
TCode: OX02

On display IMG screen select Edit, Copy, Delete, Check Company Code execute icon by following the above
path.

Select New Entries icon.

Fill in all necessary details like Company code, company name along with city, country, currency, language.
Click on save icon. A new company code will be created.
Create Plant
Plant is an organizational unit within a company where activities take place. A plant will produce goods and
makes goods available for the company. Following steps will take you through the procedure of creating
Plant:

Path to create Plant:

IMG => Enterprise Structure => Definition => Logistic General => Define, Copy, Delete check plant
TCode: OX10

On display IMG screen select Define, Copy, Delete check plant execute icon by following the above path.
Select Define Plant icon to create a new plant.
Select New Entries icon.

Fill in all necessary details like plant name along with detailed information like Language, House no.,city,
country, region, postal code. Click on save icon. A new plant will be created.
Create Storage Location
Storage location is an organizational unit which actually differentiates between different material stocks in a
Plant. Storage location is a place where stock is kept physically. Plant can be consisting of multiple storage
location. All data is stored at storage location level for a particular storage location. Following steps will take you
through the procedure of creating Storage location:

Path to Create Storage Location:

IMG => Enterprise Structure => Definition => Materials Management => Maintain Storage Location
TCode: OX09

On display IMG screen select Maintain Storage Location execute icon by following the above path.
Enter the name of plant for which you want to create storage location.
Select New Entries icon.
Enter the name of storage location along with the description of storage location. Click on save icon after
filling required information. A new Storage Location will be created.

Create Purchasing Organization

Purchasing Organization is an organizational unit under company or plant which is responsible for procurement
activities according to requirements. It is responsible for external Procurement. Purchasing organization can be
specific to plant or company. Following steps will take you through the procedure of creating Purchasing
Organization:

Path to Create Purchasing Organization:

IMG => Enterprise Structure => Definition => Materials Management => Maintain Purchasing Organization
TCode: OX08

On display IMG screen select Maintain Purchasing Organization execute icon by following the above path.
Select New Entries icon.
Enter the name of purchasing organization along with the description of it. Click on save icon after. A new
Purchasing Organization will be created.
Create Purchasing Group
Purchasing group is an organizational unit which is responsible for everyday procurement activities within an
organization. Following steps will take you through the procedure of creating Purchasing Group:

Path to Create Purchasing Group:

IMG => Materials Management => Purchasing => Create Purchasing Group TCode:
OME4

On display IMG screen select Maintain Purchasing Group execute icon by following the above path.
Select New Entries icon.
Enter the name of purchasing group along with the description of it with telephone no., fax no, etc. Click on save
icon. A new Purchasing Group will be created.
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Organizational units combined altogether form the framework of company. These organizational units can be
considered as different levels which describe the structure of an enterprise. Every level has some particular
functionality associated with it. Also every level in one or other way is related to each other. These levels are
placed according to some hierarchy company being at the top.

To establish relationship between these levels we have to assign them to one or other in such a way that they
still lie in the same hierarchy. For Example: As Company is at top level and plant is below it, so it is necessary
that plant has some relation with company
Asplantisasubpartorsmallerdivisionofcompany, so plant will be assigned to company. Four basic and must
assignments in standard SAP are:

Plant to Company code

Purchasing organization to company code

Purchasing organization to Plant

Standard purchasing organization to plant

All the assignments in SAP will be done through Display IMG screen as shown below. Path to
reach Assignment: IMG => Enterprise Structure => Assignment
Plant to Company Code
Plant is one level below company code. So we need to assign plant to company code. Following steps will
take you through the procedure of assigning plant to company code:

Path to assign plant to company code:

IMG => Enterprise Structure => Assignment => Assign Plant to Company Code TCode:
OX18

On display IMG screen select Assign plant to company code execute icon by following above path.
Select New Entries icon.

Enter name of plant and company code. Click on save. Plant is now assigned to company code.
Purchasing Organization to Company Code
Purchasing organization can be at company code level i.e. centralized purchasing organization. So we need to
assign this purchasing organization to company code. Following steps will take you through the procedure of
assigning purchasing organization to company code:

Path to assign purchasing organization to company code:

IMG => Enterprise Structure => Assignment => Materials Management => Assign Purchasing Organization
to Company Code
TCode: OX01

On display IMG screen select Assign Purchasing Organization to Company Code execute icon by following
the above path.
We can view existing assignment and also we can change accordingly. Click on save after making
changes. Purchasing organization is now assigned to company code.

Purchasing Organization to Plant

Purchasing organization can be at plant level i.e. plant specific. So we need to assign this purchasing
organization to plant. Following steps will take you through the procedure of assigning purchasing organization
to plant:

Path to assign purchasing organization to plant:

IMG => Enterprise Structure => Assignment => Materials Management => Assign Purchasing organization
to Plant
TCode: OX17

On display IMG screen select Assign purchasing organization to plant execute icon by following the above path.
Select New Entries Icon.
Enter name of plant and purchasing organization. Click on save. Purchasing organization is now assigned to
plant.
Standard Purchasing Organization to Plant
Standard purchasing organization is the default purchasing organization. We can sometimes assign
standard purchasing organization to some specific plant if we want to have default purchasing organization
for that plant. Following steps will take you through the procedure of assigning standard purchasing
organization to plant:

Path to assign standard purchasing organization to plant:

IMG => Enterprise Structure => Assignment => Materials Management => Assign Standard Purchasing
Organization to Plant
TCode: SPRO

On display IMG screen select Assign standard purchasing organization to plant execute icon by following
above path.
We can view existing assignment and also we can change accordingly. Click on save after making changes.
Standard purchasing organization is now assigned to plant.
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SAP R/3 works on real time data that is there is no time lag between data entry and data availability. The
important thing while creating any data is to maintain data integrity. SAP R/3 data is categorized into two:

Master data - Data that is created centrally and it is valid for all applications. It remains constant over
the time but we need to update it on regular basis. For Example: Vendor is a type of master data that is
used for creating purchase orders or contracts.

Transactional data - Data that is associated with processing of business transaction is

Transactional data.

SAP Master Data is of following two types:

Material Master Data

Vendor Master Data

Material Master Data

The key points about material master are as follows:

This is the enterprise main source of material specific data. This data will include information on the
materials that a company can procure, or produce, or store or sell.
 Since there are different departments in an enterprise and each department works on some specific
material. So they will enter different information regarding their material. So each user department has its
own view of material master record. So, the data screens that are used to create material master can be
divided into two categories:
Main Data: This will include basic data baseunitofmeasure, weight, purchasing data
overtoleranceandundertolerance, accounting data standardprice, movingprice.
Additional Data: This will include additional information like short description about material,
currency etc.

Material master has the four characteristics which will be discussing one by one in below context. Material

Types

Materials with some common attributes are grouped together and they are assigned to a material type. This will
differentiate materials and allow organization to manage different materials in systematic manner in accordance
to company’s requirement. For example: Raw Material, Finished Products are some of the material types.
Material type can be created by following the below steps.

Path to create material type:

IMG >= Logistics General >= Material Master >= Basic Settings >= Material Types >= Define Attributes of
Material Types
TCode: OMS2

On display IMG screen select Define Attributes of Material Types execute icon by following the above path.
Select New Entries icon.

Fill in the required information like name of material type and description. Click on save. A new material type
will be created.
Material Groups
Material group is a wider range of material type. Materials with some common attributes are taken together and
they are assigned to material group. For Example: Suppose we have some materials which need packaging, so
there material type can be electrical or food products but we can group
these material types and put them in packaged material group. Material Group can be created by following
below steps:

Path to Create Material Group:

IMG => Logistic General => Material Master => Settings for Key Fields => Define Material Groups TCode: OMSF

On display IMG screen select Define Material Groups execute icon by following the above path.
Select New Entries Icon.
Enter the name of material group along with its description. Click on Save. A new material group will be created.

Number Range
When we create material master record every material is recognized by a number, that number will be unique
and known as material number. We can assign number to material through two ways:
 External number assignment - While creating material you have to enter your own number
containingalphabetsordigits, and that should be unique.

Internal number assignment - While creating material you need not enter any number, system will
automatically generate a unique number to that material.

Define Number Range:

Internal number range can be defined by following the below steps:

Path to Create Number Range:

IMG => Logistic General => Material Master => Basic Settings => Material Types => Define Number
Range for Each material Type
TCode: MMNR

On display IMG screen select Define Number Range for Each material Type execute icon by following
the above path.

Select Intervals Icon.

We can define number range here and EXT

externaltab, ifitischeckedthenexternalnumberassignmentcanbedoneinthatmaterial. Click on save. Number
Range is now defined for the material.
Assignment of Number Range:
After defining we need to assign it to material group. Number range can be assigned by following the below
steps.

In the same screen as shown above select Groups tab.

For a particular material group we can assign number range here. Click on save. Number range is now
assigned to material group.
Material Master Creation
Material master contains all materials that a company procures produces or sells. Material Master is a central
data that is available at all the levels. Material can be created by following the below steps:

Path to create Material Master:

Logistics => Materials Management => Material Master => Material => Create Material TCode: MM01

Note: For any create transaction we use 01, for edit 02, for display 03 as suffix. On SAP

Menu screen select create icon by following the above path.

Fill in all required details like material number ifexternalnumberassignment, material type, industry sector.

Select the views you want to maintain for your material.

Enter name of plant and storage location.
Enter the required information in your material views like unit of measure, currency, standard price, moving
price etc. Click on save. A new material will be created.
Vendor Master Data
The key points about vendor master are as follows:

This is the enterprise main source of vendor specific data. This data will include information on vendors
from which a company can procure or it can sell.

Vendor Master Record will contain information like vendor's name, address.

Data in vendor master record is divided into three categories:

General Data:General data is maintained at client level and it is valid for all organizational levels.
Accounting Data:Accounting data is maintained at company level and it is valid for all plants
belonging to that company.
Purchasing Data:Purchasing data is maintained at purchasing organization level. Vendor master has

the three characteristics which will be discussing one by one in below context. Vendor Account Group

Vendors are categorized according to requirements and some of the vendors having similar characteristics are
grouped together and placed in one category. For Example: All local vendors can be placed under one
account group. Vendor Account group can be created by following the below steps.

Path to create Vendor Account Group:

IMG => Logistic General => Business Partner => Vendors => Control => Define Account group and field
selectionvendor
TCode: OBD3

On display IMG screen select Define Account group and field selection vendor execute icon by following
the above path.
Select New Entries icon.
Fill in all necessary details like name of account group, general data, and field status. Click on save. A new
Vendor Account Group will be created.
Number Range
When we create vendor master record every vendor is recognized by a number, that number will be unique
and known as vendor number. As discussed in material master, in similar way we have external as well as
internal number assignment for vendor master.

Define Number Range:

Number range can be defined by following the below steps:

Path to create Number Range:

IMG => Logistic General => Business Partner => Vendors => Control => Define Number Range for Vendor
master record
TCode: XDN1

On display IMG screen select Define Number Range for Vendor master record execute icon by following the
above path.
Select change Interval icon. It will create number range for customer account.
 Selec

t the Insert Interval Icon.

We can define number range here and EXT
externaltab, ifitischeckedthenexternalnumberassignmentcanbedoneinthatvendor. Click on save. A new Number
Range will be created.

Assignm

ent of Number Range

After defining we need to assign it to vendor group. Number range can be assigned by following the below steps.
On the same screen as shown above select Number Range tab.

For a particular vendor group assign number range here. Click on save. Number range is now assigned to
vendor group.
Creation of Vendor Master
Vendor Mater contains list of vendors from which a company can procure or it can sell. Vendor Master can
be created by following the below steps:-

Path to create Vendor Master:

SAP Menu => Logistics => Material Management => Purchasing => Master Data => Vendor => Central =>
Create
TCode: XK01

On SAP Menu screen select create for central vendor data execute icon by following the above path.
Fill in all required details like company code, purchasing org, vendor no.Ifexternalnumberassignment.

Fill in all details of vendor’s address like street name, postal code, country.
Fill in the necessary bank details of vendor.
Fill in the necessary accounting information of the vendor.

Fill in the terms of payment that are defined between company and vendor. Click on save. A new vendor
master will be created.
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SAP R/3 works on all real time data that include material master and vendor master. Material and vendor master
are separate data records for keeping information of materials and vendors from which material is procured. The
combined information of material and vendor altogether is kept in a record that we call as purchase info record.
The key points about purchase info record are as follows:

Purchasing info record stores information on material and vendor supplying that material. For Example:
Vendors current price of a particular material is stored in info record.

Purchase info record can be maintained at plant level or at purchasing organization level.

Info record can be maintained for four procurement types which are as follows: Standard:
Standard info record has information on standard orders
ordersincludedetailsofvendorandmaterial. This info record will include vendors price for supplying the
particular material.
Subcontracting: Subcontracting info record has information on subcontract orders. This info record will
include price for assembling the raw material that is supplied by the ordering party.
Pipeline: Pipeline info record has information on material that is provided by vendor through pipes. For
Example: like water,electricity.
Consignment: Consignment info record has information on material that is kept at ordering party
premises. This info record contains vendors price that is to be paid for withdrawing material from
consignment stock.

Creation of Purchase Info Record

Purchase info record can be created by following the below steps:

Path to create Info Record:

Logistics => Material Management => Purchasing => Master Data => Info Record => Create TCode: ME11

On SAP Menu screen select Create icon by following the above path.
Enter the vendor number and in info category select standard or subcontracting or pipeline or consignment
according to the requirement.
Fill in required details like material group, 1st/2nd/3rd reminder, vendor material number, personal
details, order unit, origin data and sort term.
Provide the info record note that can be called as info record description. Click on save. A new info record will be
created.

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The combined information of material and vendor altogether is kept in a record that is known as purchase info
record. But a particular material can be ordered from different vendors in different time intervals. This
information can be maintained in a list that is called as source list. The key
points about source list are as follows:
 Source list include list of possible sources of supply for a material over a given framework of time.

Source list specifies the time period of ordering of a particular material from a given vendor. Source list

can be copied from one plant to another plant.

Source list can be created by following two ways:

Automatically

Manually

Automatic Creation of Source List

Source list can be automatically created by doing some setting in material master. Automatic source list
can be created by following the below steps.

Go to MM02Editmodeofmaterialmasterforwhichyouwanttocreatesourcelistautomatically. Select all the views.

In purchasing view check the box for source list. Click on save. Source list will be created
automatically for the material.
Manual Creation of Source List
Source list can be created manually by following the below steps:

Path to maintain Source list:

Logistics => Material Management => Purchasing => Master Data => Source List => Maintain TCode: ME01

On SAP Menu screen select Maintain execute icon by following the above path.
Enter the material number for which you want to maintain source list and respective plant details.

Fill in all necessary details like valid periods, name of vendor, purchasing organization. Click on save icon.
Source list for the material is now maintained.
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Every organization acquires material or services to complete its business needs. The process of buying
materials and obtaining services from vendors or dealers is procurement. The steps which are required to
procure a material forms the procurement cycle. Every organization performs some common sequential steps
so that a material can be procured in right quantity at the right price. The important steps in procurement cycle
are as follows:

Determination of Requirement

Creating Purchase Order

Posting Goods Receipt

Posting Invoice

Determination of Requirement
This is the first step in procurement cycle. It is the logical subdivision where it is determined that what material or
services are required by company, and which supplier can fulfill the requirement. A list of requirements is made
and then it is approved by senior authority within the organization. After approval, formal list is made that is
known as purchase order with one more level of approval which is sent to the vendor.

Creating Purchase Order

Purchase order is the formal and final confirmation of the requirements which is sent to vendor to supply
material or services. Purchase order will include important information like name of material with its
corresponding plant, details of purchasing organization with its company code, name of vendor,and date for
delivery of material. Purchase order can be created by following the below steps:

Path to create Purchase Order:

Logistics => Materials Management => Purchasing => Purchase Order => Create => Vendor/ Supplying
Plant Known
TCode: ME21N

On SAP Menu screen select Create Vendor/Supplying Plant Known execute icon by following the above
path.
Fill in all necessary details like name of vendor, purchasing organization, purchasing group, company
code, details of material like material number, price, currency, plant.
Fill in all necessary details under Item by selecting the tabs like Invoice/Delivery Tab Providethetaxcode,
Paymenttermsandconditions, andincoterms, Assignment Tab (Provide the valid G/L code, business area,
and WBS element. Click on save. A new Purchase Order will be created.

Posting Goods Receipt

After processing of purchase order by vendor, material is delivered to ordering party and this process is called
as goods receipt. So, goods receipt is the phase in which the material is received by the ordering party and the
condition and quality are verified. Once material is verified against quality then goods receipt is posted. Goods
receipt can be posted by following the below steps.

Path to post Goods Receipt:

Logistics => Materials Management => Inventory management => Goods movement => Goods movement
TCode: MIGO

On SAP Menu screen select Goods movement MIGO execute icon by following the above path.
Fill in all necessary details like movement type101forgoodsreceipt, name of material, quantity received, detail
of storage location and plant in which the material will be placed. Click on save. Goods Receipt is now posted
for the material.

Posting Invoice
Invoice is received from the vendor after goods receipt, and then invoice is verified by the ordering party. So, this
is the phase in which the vendor seller is paid from the company and reconciliation of the invoice and PO is
accomplished. Invoice can be posted by following the below steps:

Path to post Invoice:

Logistics => Materials Management => Logistic Invoice verification => Document Entry => Enter
Invoice
TCode: MIRO

On SAP Menu screen select Enter Invoice execute icon by following the above path.
Fill in all necessary details like invoice posting date, amount that is paid to vendor along with quantity for
which amount is paid. Click on save. Invoice is now posted for the goods receipt.
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Procurement in every organization starts with gathering requirements. Once requirements are gathered we
need to inform the purchasing organization. Purchase Requisition is a document that will contain list of
requirements. The key points about purchase requisition are as follows:

Purchase requisition is a request that is made to purchasing organization to procure certain list of
material.

Purchase requisition is an internal document; specifically it remains within the organization. Purchase

requisition needs approval from purchasing organization.

If purchase requisition is approved then changes are possible only to limited extent.

Purchase requisition can be created for the following procurement types:

Standard: Getting finished material from vendor.
Subcontracting: Providing raw material to vendor and getting finished material. Consignment:
Procuring material that is kept in company’s premises and paying to vendor for that.
Stock transfer: Getting material from within the organization.
External service: Getting services like maintenance from third party vendor. Create

Purchase Requisition
Purchase Requisition can be created by following below steps:

Path to Create Purchase requisition:

Logistics => Materials Management => Purchasing => Purchasing Requisition => Create TCode:
ME51N

On SAP Menu screen select Create execute icon by following the above path.
Fill in all required details like name of material, quantity, delivery date, material group, plant. Click on save. A
new Purchase Requisition will be created.

After creating purchase requisition, we need to send our requirements to vendor. Requirements to vendor are
sent through a document that is known as purchase order. Purchase order can be directly created from purchase
requisition.

Creating Purchase Order from Purchase Requisition

Purchase Order from purchase requisition can be created by following below steps: TCode:

ME21N

Enter TCode to go to purchase order home screen. Select Purchase requisition as shown in below image.

Provide purchase requisition number for which you want to create purchase order. Then select execute icon.
Drag the standard reference Purchase requisition to the cart next to NB Standard PO.
Verify the details of purchase order and do the necessary changes as per requirement. Click on save.
Purchase order from purchase requisition will be created.

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Vendor selection is an important process in procurement cycle. Once requirements are gathered we will look
for possible suppliers who can fulfill the requirements at the best possible price. So a request is made to
vendors to submit their quotations indicating the price of material along with their terms and conditions. This
request is known as request for quotation. The key points about request for quotation are as follows:

Request for quotation is a form of invitation that is sent to vendors to submit quotation indicating
pricing and their terms and conditions.

RFQ contains details about goods or services, quantity, date of delivery and date of bid on which it is
to be submitted.

Quotation is a reply by a vendor in response to request for quotation.

RFQ can be created by following two ways:

Manually
 Automatically from Purchase Requisition

Manual Creation of RFQ

RFQ can be created manually by following the below steps:

Path to create RFQ:

Logistics => Materials Management => Purchasing => RFQ/Quotation => Request for Quotation => Create
TCode: ME41

On SAP Menu screen select Create execute icon by following the above step.

Fill in all required details like type of RFQ ifstandardthenAN, language, date of RFQ, purchasing
organization and group.
Provide the name of material, quantity of material, material group and quotation deadline date.
Provide the quantity and delivery date for the material.
Provide the vendor address streetnumber, city, country, pincode to which you are addressing the RFQ.
Click on save. A new Request for Quotation will be created.
Automatic Creation of RFQ from Purchase Requisition RFQ can also be created with
reference to purchase requisition by following the below steps: On the home screen of RFQ select
Reference to PReq tab.
Enter the requisition number for which you want to create RFQ. Click on save. A new Request for Quotation
will be created with reference to Purchase Requisition.
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Vendor selection is an important process in procurement cycle. Vendors can be selected by quotation process.
Once vendors are short-listed by organization, it enters into agreement with a certain vendor to supply certain
items with certain conditions and typically when agreement is reached a formal contract is signed with the
vendor. So, outline agreement is a long term purchasing agreement with vendor. The key points about outline
agreement are as follows:

Outline agreement is a long term purchasing agreement with vendor containing terms and conditions
regarding the material that is supplied by vendor.

Outline agreement are valid up to certain period of time and cover a certain predefined quantity or
value.

Outline agreement is of following two types.

Contract

Scheduling Agreement

Contract
Contract is a long term outline agreement between vendor and ordering party over predefined material or
services over certain framework of time. There are two types of contract: Quantity Contract: In this type of
contract overall value is specified in terms of total quantity of material to be supplied by vendor.
Value Contract: In this type of contract overall value is specified in terms of total amount to be paid for that
material to the vendor.

Contract can be created by following the below steps:

Path to create Contract:

Logistics => Materials Management => Purchasing => Outline Agreement => Contract => Create
TCode: ME31K

On SAP Menu screen select Create execute icon by following the above path.
Providenameofvendor,typeofcontract,purchasingorganization,purchasinggroupandplant
alongwithagreementdate.
Fill in all necessary details like agreement validity start date, end date, pay termsi. etermsofpayment.

Provide material number along with target quantity if quantity contract or net price if value contract and
material group. Click on save. A new Contract will be created.
Scheduling Agreement
Scheduling agreement is a long term outline agreement between vendor and ordering party over a predefined
material or service which are procured on predetermined dates over a framework of time. Scheduling agreement
can be created by following two steps:

Creating scheduling agreement

Maintain scheduling lines for the agreement

Creating scheduling agreement

Scheduling agreement can be created by following the below steps.

Path to create Scheduling Agreement:

Logistics => Materials Management => Purchasing => Outline Agreement => Scheduling Agreement =>
Create => Vendor Known
TCode: ME31L

On SAP Menu screen select Create execute icon by following the above step.
Provide name of vendor, agreement typeLPforschedulingagreement, purchasing organization,
purchasing group, plant along with agreement date.
Fill in all necessary details like agreement validity start date, end date, pay-termsi. etermsofpayment.
Providematerial numberalongwithtargetquantity,netprice,currencyandmaterial group. Click onsave.
AnewSchedulingAgreementwill becreated.

Maintain scheduling lines for the agreement

Schedule lines can be maintained for scheduling agreement by following the below steps.

Path to maintain Schedule Lines:

Logistics => Materials Management => Purchasing => Outline Agreement => Scheduling Agreement =>
Delivery Schedule => Maintain
On SAP Menu screen select Maintain execute icon by following the above step.

Provid
e the scheduling agreement number.
Select line item. Go to Item tab. Select delivery Schedule.
Provide delivery schedule date, target quantity. Click on save. Schedule lines are now maintained for the
scheduling agreement.

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A particular material can be procured from different vendors depending upon the requirement. So, total
requirement of a material is distributed to different vendor’s i.e. quota is assigned to each source of supply. This
is known as quota arrangement. The key points about quota arrangement are as follows:

Quota arrangement divides the total requirement of material among certain sources of supply i.e.
vendors and then assigns quota to each source.

This particular quota specifies the portion of material that is to be procured from assigned vendor or
source.

Quota rating is used to determine the amount of material that is to be assigned to particular source or
vendor. The source with lowest quota rating represents the valid source.

Quota rating can be calculated by following formula:

Quota rating = QuotaAllocatedQuantity + QuotaBaseQuantity/Quota
Where Quota Allocated Quantity is total quantity from all orders that is procured from a particular
source. Quota Base Quantity is quantity from new source of supply. Quota is total requirement of
material that is given to a particular source of supply.

The mandatory setting before creating quota is info record and source list should be maintained for the
particular material. Also in material master, source list and quota arrangement usage check box
should be checked. This setting can be made in material master by going to TCode MM03. In
purchasing view check the quota arrangement usage and source list. Setting is now maintained for
quota arrangement.