Overview of Sap Material Management | Essential Components | Role in business

SAP MM: - It is one of the most important modules in SAP ERP. SAP MM deals with the material procurement and inventory system in a business process. It makes sure that there is no shortage of any material or no trouble in the supply chain process of an organization thereby making the business process run faster, smoother and efficiently.

‘Master Data’ and ‘Procurement’ are the two terms one should know when talking about SAP MM.

Master Data:

Everything in MM revolves around Master Data. A certain Master Data is required to record every activity that takes place in the process. It is a core data that stores almost every record. To make any transaction, Master Data is used as a base.

Example of Master Data

·         Material master data

·         Customer master data

·         Vendor master data

·         Pricing/conditions master data

·         Warehouse management master data (storage bin master data)

Procurement:

It is the main process involved in SAP MM. Procurement is done for various types of goods. Initially, a purchase order; which is a list of goods and materials to be procured is documented and given to the vendor.  Similarly different types of purchase orders are created for different procurements.

For different types of procurement, four types of purchase orders are created which are as follows.

·        Subcontracting Purchase Order

In Subcontracting, the components which are required by the vendor (subcontractor) to manufacture a product are listed in the purchase order. They are bought from the other party and are given to the vendor (subcontractor) for manufacturing.

·        Consignment Purchase Order

In consignment, the products of the vendor are at the organization store. If we need to use material from that store, we have to pay to the vendor.

·        Stock Transfer Purchase Order

In stock transfer, good are procured and supplied within the company. Here, the purchase order used for procuring goods is called ‘stock transport order.’ No external vendor involves. Internally, goods are ordered from one plant (issuing plant) by the other plant (receiving plant).

·        Service Purchase Order

This purchase order is used for services provided by the third party to our company. The third party provides services like maintenance of electricity, oiling of machines etc.

              Procurement Life Cycle:

Determination of Requirements:

¨     Here we determine what are the materials or services required.

Requisition:

¨     Here we order goods or services that the organization need from purchasing department

Purchase Order:

¨     Once the Requisition is approved, it becomes a purchase order

Goods Receipt:

¨     After receiving goods, they are checked for condition and quality. Also, we receive an invoice from the vendor

Invoice Verification and Vendor Payment:

¨     Invoice received is verified and payment is made to the vendor.

Essential components of SAP MM

·         Determine requirements

·         Source determination

·         Vendor Selection

·         Order Processing

·         Order follow up

·         Goods receipts and Inventory management

·         Invoice Verification

           Role of SAP MM in Business:

·        SAP MM plays a key role in Logistics area of an organization where it manages procurement activity.

·        It supports all sort of material management like planning, control etc.

·        Looks after interfaces between logistics and Accounts Payable.

·        It also extends many other modules in logistics area like Plant Maintenance, Production Planning, Sales and Distribution, Warehouse Management etc.