SPA Greenfield Implementation

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SAP MM (Materials Management)

SAP MM (Materials Management) is a module in SAP ERP Central Component (ECC) that
provides companies with materials, inventory and warehouse management capabilities.
The Overview
Here in Material Management Module, we calibrate the system to understand various types of
materials that are used in the business process. Mapping different business processes like Stock/Non
stock item purchase, sub-contracting, Stock transfers, services etc. It also configures different
purchase documents like PR, RFQ, PO, Contract and Schedule Agreement etc with or without Release
procedure. Logistics invoice verification for incoming invoice checking.

Organizational Structure
Organization structure is the framework of a company according to which business is conducted in every
company. Organization structure consists of many levels having direct or indirect relationship with one another.
Organization structure is also referred as enterprise structure.

Organization Structure

 Plants
 Storage Locations
 Purchase organization
 Purchasing group

Fig 01. Flow Diagram of MM Org. Structure

Plant
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Plant is a manufacturing location where all the production of materials and products takes place and it is also
the place where these products are temporarily stored before they are exported out to the warehouses. In
other words, a plant is a place where inventory valuation takes place.

Path: SPRO ⇒ Enterprise Structure ⇒ Definition ⇒ Logistics general ⇒ Define plant

T- Code: OX10
PLANT- 01
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PLANT- 02
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PLANT- 03
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Storage Location
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A Storage Location is an organizational unit. where stock is kept physically & which actually differentiates
between the different material stocks in a Plant. A plant can consist of multiple storage locations.

Path: IMG Enterprise Structure Definition Materials Management Maintain Storage Location

T-Code: OX09

Storage Location DESCRIPTION

FG01 FINISHED GOODS

SF01 SEMI FINISHED GOODS
RM01 RAW MATERIALS
PM01 PACKAGING MATERIALS
SM01 SERVICE MATERIALS

01) Storage Location for Hyderabad Plant (HYD1)

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02) Storage Location for Vizag Plant (VZG1)

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03) Storage Location for Mumbai Plant (MUM1)

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Purchasing Organization

A Purchasing Organization is an organizational unit under Company or Plant that is responsible for procurement
activities according to requirements.

Path: IMG Enterprise Structure Definition Materials Management Maintain Purchasing

Organization

T-Code: OX08

Purchase Organizations
Company Code Plant Referenc
Normal Standard
e
HYD1
SP01
VZG1 PPOG SPOG RPOG
SP02 MUM1
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Purchasing Group

A Purchasing Group is an organizational unit that is responsible for the everyday procurement activities within
an organization.

Path: IMG Materials Management Purchasing Create Purchasing Group

T-Code: OME4

Purchasing Group Description

PUR1 Raw Materials
PUR2 Consumables
PUR3 Services
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Assignment Of organizational Structure:

01) Assign Plant to Company Code

Path: IMG Enterprise Structure Assignment Assign Plant to Company Code

T-Code: OX18

02) Assign Purchase Organization to Plant

Path: IMG Enterprise Structure Assignment Materials Management Assign

Purchasing organization to Plant

T-Code: OX17
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03) Assign Standard Purchase Organization to Plant

Path: IMG Enterprise Structure Assignment Materials Management Assign

Standard Purchasing Organization to Plant

T-Code: SPRO

04) Assign Purchase Organization to Reference Purchase Organization

Path: IMG Enterprise Structure Assignment Materials Management Assign

Purchase Organization to Reference Purchase Organization
T-Code: SPRO
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SAP MM (Materials Management)

Master Data:
Master data refers to the fundamental, unchanging information about various entities within a business
process. In the context of SAP S/4HANA MM, master data includes essential details about materials, suppliers,
customers, and other relevant entities.

Fig. Types of Master Data in SAP MM

01) Material Master Data: [T-Code: MM01, MM02, MM03]

The material master record contains comprehensive information about the materials a company uses in its
operations. It encompasses details such as material type, description, unit of measure, valuation data,
procurement information, and classification data. The material master data is the foundation for various
procurement, production, and inventory processes.
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A) Material Type: Attribute that subdivides materials with the same properties into groups.
Sr. No. Initials Material Type Description

1 ROMT ROH RAW Materials

2 SFMT HALB Semi finished Materials
3 FIMT FERT Finished Materials
4 TRMT HAWA Trading Goods
5 SPMT ERSA Spare Parts
6 PKMT VERP Packing Materials
7 SEMT SERV Services
8 NSMT NLAG Non stock items
9 NVMT UNBW Non valuated items

Path: SPRO ⇒ Logistics General ⇒ Material Master ⇒Basic Settings ⇒ Material Types ⇒ Define
Attributes for Material Types

T- Code: OMS2
01) ROH Material
Take Position -

Give Standard material type in the material type field

Enter it and click on copy icon

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Here in this screen Give new material type select the Screen views and click on copy icon

Enter & save it.

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02) SEMI FINISHED MATERIAL(HALB)

Take Position –

Give Standard material type in the material type field enter & copy icon

Here in this screen Give new material type select the Screen views and click on copy icon

Enter & save it.

03) FINISHED MATERIALS (FERT)

Take Position –
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Give Standard material type in the material type field enter & copy icon

Here in this screen Give new material type select the Screen views and click on copy icon

Enter & save it.

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04) TRADING GOODS (HAWA)

Take Position –

Give Standard material type in the material type field enter & copy icon

Here in this screen Give new material type select the Screen views and click on copy icon

Enter & save it.

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05) Spare Parts (ERSA)

Take Position –

Give Standard material type in the material type field enter & copy icon

Here in this screen Give new material type select the Screen views and click on copy icon
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Enter & save it.

06) Packaging Material (VERP)

Take Position –

Give Standard material type in the material type field enter & copy icon
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Here in this screen Give new material type select the Screen views and click on copy icon

Enter & save it.

07) Services (SERV)

Take Position –

Give Standard material type in the material type field enter & copy icon
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Here in this screen Give new material type select the Screen views and click on copy icon

Enter & save it.

08) Non-Stock Materials (NLAG)

Take Position –

Give Standard material type in the material type field enter & copy icon
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Here in this screen Give new material type select the Screen views and click on copy icon

Enter & save it.

09) Non-Valuated Materials (UNBW)

Take Position – Give Standard material type in the material type field enter & copy icon
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Here in this screen Give new material type select the Screen views and click on copy icon

B) Number Ranges

Number Ranges:

Every document or master data will be created with one unique number. This unique number will get
from Number series, which was assigned to object. Number ranges need to define in each server. It’s
not transportable from one server to another server. Assignment group and code will be
transportable but number series defining have to do in each server.

Number ranges and Material Type assignment:

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Material Type Group No Number ranges Internal/External

03 100000 199999 Internal

ROMT ROMT_Group
04 ROMT01 ROMT099999 External
05 200000 299999 Internal
SFMT SFMT_Group
06 SFMT01 SFMT099999 External
07 300000 399999 Internal
FIMT FIMT_Group
08 FIMT01 FIMT099999 External
17 400000 499999 Internal
TRMT TRMT_Group
18 TRMT01 TRMT099999 External
19 500000 599999 Internal
SPMT SPMT_Group
20 SPMT01 SPMT099999 External
21 600000 699999 Internal
PKMT PKMT_Group
22 PKMT01 PKMT099999 External
23 700000 799999 Internal
SEMT SEMT_Group
24 SEMT01 SEMT099999 External
25 800000 899999 Internal
NSMT NSMT_Group
26 NSMT01 NSMT099999 External
27 900000 999999 Internal
NVMT NVMT_Group
28 NVMT01 NVMT099999 External

 You can’t define directly number ranges to material types, you have to create group and assign
material type to this Group.
 Multiple Material types can be assigned to one Group.

Path: SPRO⇒ IMG⇒ Logistic General⇒ Material Master⇒ Basic Settings⇒ Material
types⇒ Define Number ranges for each Material type

T-Code: MMNR

 Define Number Ranges to Material type ROMT [Raw Materials]

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 Define Number Ranges to Material type SFMT [Semi-Finished Materials]

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 Define Number Ranges to Material type FIMT [Finished Materials]

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 Define Number Ranges to Material type TRMT [Trading Goods]

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 Define Number Ranges to Material type SPMT [Spare Parts]

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 Define Number Ranges to Material type PKMT [Packing Materials]

 Define Number Ranges to Material type SEMT [Services]

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 Define Number Ranges to Material type NSMT [Non stock items]

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 Define Number Ranges to Material type NVMT [Non valuated items]

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C) Material Group: Material which are having same characteristics are grouped together and assign to
a material group in SAP. It is not a control function like material type, where the material groups are
used to generate the reports

Sr. No. Material Groups Description

1 OOO1 Steel
2 OOO2 Rubber
3 OOO3 Plastic
4 OOO4 Glass
5 OOO5 Fabric
6 OOO6 Synthetic Materials

Path: SPRO ⇒ IMG ⇒ logistics – General ⇒ Material Master ⇒ Settings key for Fields ⇒ Define
Material groups

T-Code: OMSF

Goto Transaction code OMSF Select New Entry -

Fill the Material Group and Material Group Description And save it
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D) Industry Sector: Industry sectors indicate the assignment of a material to a certain branch of
industry (for example, plant engineering and construction, chemical industry, mechanical engineering,
and pharmaceuticals industry).

Path: SPRO ⇒ Logistics General ⇒ Material Master ⇒ Field Selection ⇒ Define Industry
Sector and Industry-Sector-Specific Field Selection

T- Code: OMS3
Industry Sector
Industry Sector Industry Description Field Reference
1 Automobile Industry M

Go-To New Entry -

Enter the Industry sector, Description and Field Reference And save it.
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E) Purchasing Value Key: Purchasing Value Key is useful for setting reminder for the material you can
find in material master in Purchasing view.

Purchasing value key determines the following things:

1) Reminders keys- There are 3 keys which determine in how many days before or after the vendor has to be
reminded or urging letters for the material procurement.

2) Over and under deliveries tolerances.

3) Order acknowledgement requirements in PO.

It gives all the conditions in which the procurement is made.

Path: SPRO ⇒IMG ⇒MM ⇒Purchasing ⇒MM ⇒Define Purchasing Value Keys

T-code: OME1
Purchase Value key Reminder 1 Reminder 2 Reminder 3 Tol. Under delivery Tol. Over delivery

S001 10 20 30 0 0
S002 0 0 0 5 5
S003 0 0 0 0 0
S004 10 20 30 5 5

01) Purchasing Value Key (S001)

After entering the OME1 T- Code Bellow screen will appear, then select New Entry-
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After that You have to put the new purchasing value key that you have to configured. Also enter the mandatory
data i.e. Deadline Monitoring, Tolerance limit.

And save it. After Saving the information you will see the Your PUR. Value Key on main screen.

02) Purchasing Value Key (S002)

After entering the OME1 T- Code Bellow screen will appear, then select New Entry- After that You have to put
the new purchasing value key that you have to configured. Also enter the mandatory data i.e. Deadline
Monitoring, Tolerance limit.
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And save it. After Saving the information you will see the Your PUR. Value Key on main screen.

03) Purchasing Value Key (S003)

After entering the OME1 T- Code Bellow screen will appear, then select New Entry- After that You have to put
the new purchasing value key that you have to configured. Also enter the mandatory data i.e. Deadline
Monitoring, Tolerance limit.

And save it. After Saving the information you will see the Your PUR. Value Key on main screen.
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04) Purchasing Value Key (S004)

After entering the OME1 T- Code Bellow screen will appear, then select New Entry- After that You have to put
the new purchasing value key that you have to configured. Also enter the mandatory data i.e. Deadline
Monitoring, Tolerance limit.

And save it. After Saving the information you will see the Your PUR. Value Key on main screen.

Material Ledger
Material Ledger is a tool that collects transaction data for materials whose master data is stored in
material master. The material ledger uses this data to calculate prices to valuate these materials.
The material ledger is the basis of actual costing.

 The material ledger uses this data to calculate prices to valuate these materials
 The material ledger is the basis of actual costing. It enables material inventories to be valuated in
multiple currencies and allows the use of different valuation approaches.

Material Ledger as a tool fulfils two basic objectives:

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Ability to manage material prices in multiple currencies/valuations

Actual costing

Multiple currencies and valuation overview

SAP Material Ledger is the multiple currency valuation. A total of three currencies and two valuation
views are possible:

 Local currency (legal valuation in the currency of company code)

 Group valuation (corporate group valuation for reporting purposes)
 Profit centre (profit centre valuation, for transfer pricing functionality, for example)

Moving Average Price/Periodic Unit Price

 The moving average price is the price that changes as a result of goods movements and the entry
of invoices, and which is used to valuate a material.
 The periodic unit price is the price that changes within a period as a result of goods movements
and invoice entries. If you have the material ledger active you can use this price to valuate a
material after the closing entry at the period end.

Actual costing with SAP Material Ledger is done in three steps:

 Preliminary valuation at standard cost and recording of price differences

 Price determination: calculation of periodic unit price (PUP) for single and multilevel products
 Revaluation of inventory with periodic unit price (PUP)

Steps to Material Ledger Activation for Plants:

 OMX2: Define Material Ledger Type

 OMX3: Assigning Material Ledger Type to The Valuation Area

 OMX1: Activation Of Material Ledger

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 CKMSTART: Test Run and Production Setup of The Valuation Area

Material Master
The material master contains information on all the materials that a company procures or
produces, stores, and sells. It is the company's central source for retrieving material-specific
data. This information is stored in individual material master records.

Sr. No Semi- Raw Material Material Industry Plant Storage

finished Number Sector Location
1 Car Engine SFMT01 1 HYD1 SF01
Pistons ROMT01 1 HYD1 RM01
Piston Rings ROMT02 1 HYD1 RM01
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Crankshaft ROMT03 1 HYD1 RM01

Camshaft ROMT04 1 HYD1 RM01
Timing Belt/Chain ROMT05 1 HYD1 RM01
Cylinder Head ROMT06 1 HYD1 RM01
Engine Gaskets ROMT07 1 HYD1 RM01
2 Fuel System SFMT02 1 HYD1 SF01
Fuel Pump ROMT08 1 HYD1 RM01
Fuel Injector ROMT09 1 HYD1 RM01
Fuel Filter ROMT10 1 HYD1 RM01
Throttle Body ROMT11 1 HYD1 RM01

Path: SPRO⇒ Logistics ⇒ Materials Management ⇒ Material Master ⇒

Material ⇒ Create Material
IMG⇒

T-Code: MM01/MM02/MM03 ⇒ Create/ Change/ Display

Steps To create Material Master:

Step 2: Select Views and Organizational Levels

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Step3: Fill all Required data For Material creation and save the Information
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SAP MM (Materials Management)

Business Partner
SAP Business partner is a person, Organization, or group of organizations. It is a single point of entry
to maintain company code, vendor and customer data. BP is integrated with SRM and CRM modules
into core modules.
For creation of Vendor and customer to a business partner we need the inputs of General data,
company code data, Purchase organization data and Sales organization data.
In sap S4HANA system we have multiple options to create business partners. Those are
 Business partner as a customer
 Business partner as a Vendor
 Business partner as a customer and vendor
 Prerequisites to create Business partners to customer:
1) Define Number ranges for the BP
2) Define groupings and assign number ranges to BP
3) Define Business partners roles and grouping
4) Create vendor/customer account group
5) Create the vendor/customer number ranges and account groups
6) Number assignment for direction BP to vendor & BP to customer
7) Creation of business partners

A) Define Number ranges for the BP

For configuring the BP number ranges we need to procced the following path
Path: SPRO⇒ Cross application components⇒ SAP Business partners⇒ SAP Business
partners ⇒ Basic Settings ⇒ Number Ranges and Grouping ⇒ Define Number Ranges
01)NO. Range for Business Partner 1(Domestic)

Step 1: Click on the 2nd tab i.e. intervals, and then click on the + icon to add the row for creating new number
range then give no. range no. enter the from no. range & To no. range and save it.
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02)NO. Range for Business Partner 2(Import)

Here in this screen, we given the no. range interval as 03 for the import vendor account group

03)NO. Range for Business Partner 3(Services)

Here in this screen, we given the no. range interval as 04 for the import vendor account group

B) Define groupings and assign number ranges to BP

Path: SPRO⇒ Cross application components⇒ SAP Business partners⇒ SAP Business
partners ⇒ Basic Settings ⇒ Number Ranges and Grouping ⇒ Define Grouping and Assign
Number Ranges

Grouping 1 (Domestic)
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Step1: Go to new entries or copy from standard one.

And then enter the Grouping name, Short Name, Description & No. range for that BP Grouping After
Entering all information save the BP Group.

Step 2: In next screen we see that our BP Group is created.

Grouping 2 (Import)
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Step1: Select new entry from above screen and enter the Grouping name, Short Name, Description
& No. range for that BP Grouping After Entering all information save the BP Group.

Step 2: After saving the BP grouping it appears on main screen.

Grouping 3 (Services)
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Step1: Select new entry from above screen and enter the Grouping name, Short Name, Description
& No. range for that BP Grouping After Entering all information save the BP Group.

Step 2: After saving the BP grouping it appears on main screen.

C) Define Business partners roles and grouping

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Path: SPRO⇒ Cross application components⇒ SAP Business partners⇒ SAP Business
partners ⇒ Basic Settings ⇒ Business Partner Roles ⇒ Define Business Partner Role Grouping
01) SPA1

Select New Entries to create new Business Partner Grouping

Step1: Enter the information to like Role Grouping, Title, Description and Role Group Category After
entering all information click on save.

Step2: Save the BP Role Grouping, we have to assign the BP Role Grouping to the BP Role for that select the
created role Group and Click on BP Role Grouping BP role. Then we have to enter the Business partner
roles to our BP Role Group

Step3: Here we need to define the BP roles and assign those to particular BP role grouping.

Normally SAP standard BP roles are

 000000-BP General data

 FLVN00- FI vendor data (company code data)
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 FLVN01- Purchase org data

 FLCU00- Customer company code data
 FLCU01- Customer sales org data

For the BP We are taking the standard BP Role Category

After entering the Business Partner Role for that BP Role Group Save the information.

02) SPA2

Select New Entries to create new Business Partner Grouping

Step1: Enter the information to like Role Grouping, Title, Description and Role Group Category After
entering all information click on save.
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Step2: After saving the BP Role Grouping, we have to assign the BP Role Grouping to the BP Role for that
select the created role Group and Click on BP Role Grouping BP role. Then we have to enter the Business
partner roles to our BP Role Group

03) SPA3
Select New Entries to create new Business Partner Grouping

Step1: Enter the information to like Role Grouping, Title, Description and Role Group Category After
entering all information click on save.
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Step2: After saving the BP Role Grouping, we have to assign the BP Role Grouping to the BP Role for that
select the created role Group and Click on BP Role Grouping BP role. Then we have to enter the Business
partner roles to our BP Role Group

Step3: Select the New Entry And enter the BP role for that Role grouping
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Step 4: In bellow screen We see that all BP Role Grouping Are created for three different Category.

Vendor Master Data

Vendor Master Data is the enterprise main source of vendor-specific data. It includes information on vendors
from which a company can procure, or can sell. A vendor master record contains information such as vendor's
name, address, etc.

A) Create vendor account group

Vendor account group differentiates the type of vendor, based on this system will give vendor code and
manages the field.

- SAP has defined the standard vendor account groups are 0001 & LIEF
- We can use standard account group or we can customize our own by coping standard and by using
following Transaction Code or Path.
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Path: SPRO⇒ Financial Accounting ⇒ Accounts Receivable and Accounts Payable ⇒ Supplier
Accounts Master Data ⇒ Preparations for Creating Supplier Master Data ⇒ Define Account
Groups with Screen Layout (Vendors) ⇒
T-Code: OMSG/OBD3
Number Ranges
Account Groups Name Internal/ External
From No. To No.
1000 10000 Internal
SAP1 Domestic
A1000 A10000 External
Account Groups
10000 20000 Internal
SPA2 Import
A10000 A20000 External
20000 30000 Internal
SPA3 Services
A20000 A30000 External

We are taking the three Types of Accounts groups that are Domestic, Import and Service
01) Account Group SPA1- Domestic
Step1: Select 0001 Standard Account Group And click on copy you will get into the new window

Step2: Enter the New Account Group, Description And you have to select the fields from the field status as
per the requirements and then you have to save the account group

02) Account Group SPA2- Import

Step1: Select new entry or copy from below existing one
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Step2: Enter the New Account Group, Description And you have to select the fields from the field status as
per the requirements and then you have to save the account group

03) Account Group SPA3- Services

Step1: Select new entry or copy from below existing one
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Step2: enter the New Account Group, Description And you have to select the fields from the field status as
per the requirements and then you have to save the account group

B) Create the vendor number ranges

Path: SPRO⇒ Financial Accounting ⇒ Accounts Receivable and Accounts Payable ⇒ Supplier
Accounts Master Data ⇒ Preparations for Creating Supplier Master Data ⇒ Create Number
Ranges for Vendor Accounts

T- Code: OMSJ/XKN1
Here we need to configure the Customer accounts number ranges

Step1: Select the Intervals From bellow screen

Step 2: Click on the + icon to get new row for creating the new number range. Give new Number range no.
and the From No. And to. No. And save it.
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Step 3: Again, take two rows to insert the new number ranges for remining two account groups Give the no.
ranges and save it.

Assignment of Vendor Account Groups to the Vendor Number Ranges

Path: SPRO⇒ Financial Accounting ⇒ Accounts Receivable and Accounts Payable ⇒ Supplier
Accounts Master Data ⇒ Preparations for Creating Supplier Master Data ⇒ Assign Number
Ranges to Vendor Account Groups

T- Code: OMSJ
Step1: Enter the transaction Code to Assign the number ranges
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Step 2: Enter the number ranges that we created for the vendor account group and save it.

Master Data Synchronization of Vendor and Business Partner

A master data sync is a process in which you and your business partner examine your master data to
ensure that you are both using the same master data elements and the same information for each
element.
Path: SPRO⇒ Cross application components⇒ SAP Business partners⇒ Master Data
Synchronization⇒ Customer/Vendor Integration⇒ Business Partner Settings ⇒ Settings for Vendor
Integration⇒ Assign Keys⇒ Define Number Assignment for Direction BP to Vendor
Step 1- Select New Entry
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Step2: Fill the required details like Vendor Account Group and BP Group For the synchronization of
BP to Vendor

Step 3: Save it. In bellow screen we see that assignment is done successfully.

Creation of Vendor through a Business partner:

T Code: BP

Business Partner can be created as a person, organization or a group in which we have some
business interest. It is a single transaction to create, edit, and display the master data. You can assign
different roles for a single business partner which implies whether this BP is a vendor or a customer
or both.
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01)Business Partner General Data:

Step 1: Enter T code BP. Then click on the organization tab.

Step 2: You will get a default role 000000 (Business Partner General).
The Business Partner roles you assign to a business partner reflect the functions it has and the
business transactions in which it is likely to be involved.
Select the grouping from drop down which decides the number range.

Step 3: Enter the all-mandatory fields for Business Partner General and then save.
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Vendor
[Company Code Level]
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Step 4: Extend BP to vendor role to FLVN00 (FI Vendor) Financial Accounting

Step 5: Click on Company code and enter the company code for which you wanted to extend the
Vendor. Go to Account management tab: Enter the Vendor Reconciliation Account & Maintain all the
mandatory fields and then save.

Step 6: Go to payment Transaction Tab-

Payment Term: Terms of Payment are conditions agreed between business partners for the
payment of invoices. The conditions define the due date and the cash discount offered for payment
of the invoice within a certain period.
Payment Method: Which may be used in automatic payment transactions with this
customer/vendor if you do not specify a payment method in the item to be paid.
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Step 7: Go to Correspondence tab:

Dunning Procedure: Dunning us for to give remainder to customer, In dunning procedure field we
use dunning variant to correspondence. And then click on save it.

Vendor
[Purchasing Data]

Step 8: Extending Vendor to Purchasing Data, select Role FLVN01 from dropdown.
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Step 9: Select Purchasing Data and then choose Purchasing Org and press enter.Enter all the
mandatory fields.

Step 10: Enter all the mandatory fields. Save the vendor.

This is how a BP is created as a vendor.

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Purchasing Info Record

Purchase info records are information about terms for purchasing a specific material from a vendor.
They are maintained at vendor/material combination and can contain data for pricing and conditions,
overdelivering and underdelivering limits, planned delivery date, availability period.

Procurement types in info record

I. Standard
A standard info record contains information for standard purchase orders. The info records can be
created for materials and services with and without master records.

II. Subcontracting
A subcontractor info record contains ordering information for subcontract orders. For example, if you
subcontract the assembly of a component, the subcontractor info record would include the vendor’s
(subcontractor’s) price for assembling the component.

III. Pipeline
A pipeline info record contains information on a vendor’s commodity that is supplied through a
pipeline or pipes (for example, oil or water) or by similar means (for example, electricity through the
mains). The info record contains the vendor’s price for the use of such commodities by the buyer
(“pipeline withdrawals”). You can keep withdrawal/usage prices for different validity periods.

IV. Consignment
A consignment info record contains information on a material that vendors keep available at their
own cost on the orders premises. The info record contains the vendor’s price for withdrawals by the
ordered from consignment stock. As in the case of the pipeline info record, you can keep prices for
different validity periods.

 Create a Purchase Info Record

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Purchase info records can be created for every type of procurement, and are processed using the
Transaction code

 ME11- Create
 ME12- Change
 ME13- Display

Step 1:

 Enter transaction ME11 in command prompt.

 Key for creating the info record is Vendor/Material combination. You can enter purchasing
organization and/or Plant.
 You have to choose an info category for desired procurement type. Press ENTER to proceed
to the next screen.

Step 2: Here you give information on Info Record General Data. This information is maintained for all
procurement types (maintained only once for all: Standard, Subcontracting, Pipeline, Consignment),
and there are the most relevant fields:
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Step 3: This view is maintained separately for every procurement type. We have chosen Standard
procurement type, and we can populate several relevant fields here.

Step 4: Standard texts for this material/vendor combination can be defined in Texts view of the
purchase info record.
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 You can enter the info record note in these five lines, and it will be active only if a check box
for info record note is ticked.
 Same logic as previous except that this is a standard item text that will be copied to purchase
order item.

Pricing procedure
The main concept of pricing procedure is combination of different type charges, like Gross
price, freight, discount, surcharges etc.
We use pricing procedure to determine these all conditions into one procedure, where we
can find the sub-total for net amount.
To understand pricing procedure, we have to be comfortable about these below things:

 Condition Table
 Access Sequence
 Condition Type
 Condition Record.
 Schema Group
 Calculation Schema
 Schema Determination

1. Condition Table

 It’s a table where system saves the all fields with the combination for individual condition
record. Suppose if I use Plant as condition table, then the condition record will be created for
plant only.
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 We can use many fields in one condition tables.

Step 1: Maintain Condition Table

Path: SPRO- IMG- MM- Purchasing- Conditions- Define Price Determination Process- Maintain
Condition Table- Create condition table

T-Code: M/03

[Note: As per standard SAP, they give the entire condition table for general business requirement. If any
condition table doesn’t fulfil your requirement, then you can create new condition table.]

2. Access Sequence

 The main concept of Access sequence is, it searches condition record for condition type from
condition table.

 One access sequence can contain one or multiple condition tables.

 Suppose we maintain 4 condition tables in one access sequence. Then when a condition type will
search for condition record via this access sequence, the access sequence will allow to search
only these 4 condition tables.

Step 2: Maintain Access Sequence

T-code: M/07

Path: SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define Access

Sequences.
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3. Condition Type

In simple term, condition type is used for different type of charges. Like gross price, discount, freight,
rebate etc.

Suppose we purchase a material for price 10, we get a discount of price 2. Then the price 10 will be
going to a condition type and the price 2 will be going to another condition type.

In general, above Flow will give the concept how a condition type will search for the condition
records:

Step 3: Maintain Condition Type

T-code M/06

Path: SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define Condition

Types-Define Condition Type
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As for gross price SAP default maintain as PBXX for time independent condition and PB00 for time
dependent condition.

Time Independent condition is use with validity period, which can be differ as validity period (we use
it in info record, RFQ, Contract, SA (as per configuration for document type)).

So, we don’t need to create new condition type for gross price, although you can create your own
starting with Z.

Assign you newly created access sequence to the gross price condition type (I have maintained in for
PBXX)

Next you can find all types of condition type like as freight, discount, rebate, cash discount etc. If it
can fulfil your requirement, then no need to create new condition type. If doesn’t the go for New
Entries.
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4. Calculation Schema

Here we maintain sequence for the pricing calculation, like gross price, discount, rebate, surcharges
etc. Here we maintain the calculation for all condition types and group together all required
condition types for our pricing procedure.

Step 4: Maintain Calculation Schema

T-code: M/08

Path: SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define Calculation

Schema

Here we give the calculation for all condition types.

In this tab also you can find the SAP default calculation schema, you can also use one of them as
your pricing procedure. Although you can create new calculation schema as per your requirement.

Just click on New Entry. (Or you can copy old schema and can modify yourself. then select copy as…)
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Give the name and description for new procedure.

Then Select this procedure and press Control (in left side)

Maintain PBXX as gross price in step 1, counter 1, leave the from and to blank, Subtotal will be value
9-Copy values to KOMP-BRTWR (gross value).

Maintain other condition types as per your requirement.

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In control data we added the Condition of GST i.e. (State and Central Gov.)

5. Schema Determination
Here we maintain the pricing procedure for purchasing document. We maintain calculation schema
combination of per each vendor – schema group and each purchase organization – schema group.

Step 5: Maintain Schema Group for Vendor

T-code: OMFN

Path: SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define

Schema Group-Schema Groups: Vendor

Just click on New Entries and enter the Schema Grp Vendor and give the description.
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Step 6: Maintain Schema Groups for Purchasing Organizations

T-code OMFM

Path: SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define Schema

Group-Schema Groups for Purchasing Organizations

Just click on the new entries and enter the Schema Grp Pur Org and description
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Step 6: Assign Schema Group to Purchasing Organization

T-code: OMFP

Path: SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define

Schema Group-Assignment of Schema Group to Purchasing Organization

Here find your Purchase Organization, and assign Schema Pur Org to Purchase organization.

Step 7: Maintain Schema Determination

T-code: OMFO

Path: SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define Schema

Determination-Determine Calculation Schema for Standard Purchase Orders

Step 8: Assign Schema group to Vendor

When you are going to create a vendor from Business Partner in purchasing data you will find
“Schema Group, Vendor”
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Here assign the schema group which you have created on step 5.

You can also maintain it on existing vendor via BP Transaction Code & Save your data.

Create PO with this purchase organization and with this vendor.

We can see the new pricing procedure is working perfect.

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Output Determination
Output determination is a term which is used to get the print, fax or e-mail outputs for
different documents in SAP. Configuration is same as Pricing in SAP, where you have
condition tables, output Types, Access Sequence and Output determination procedures.

1. Condition Table

Path: SPRO > Material Management > Purchasing -> Message -> Output Control->Condition
Tables->Define Condition Table for Purchase Order

Select:
Purchasing Doc. Type, Purch. Organization, Vendor
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2. Access Sequences
Output types are used to represent various forms of output in the SAP System

Path: SPRO -> Material Management-> Purchasing -> Message -> Output Control->Access
Sequences->Define Condition Table for Purchase Order

3. Message Type
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Path: SPRO -> Material Management-> Purchasing -> Message -> Output Control->Message
Types->Define Message Type for Purchase Order

4. Message Determination Schemas

The system assigns the message determination schema that is valid for the purchasing
document. The schema contains the message type. The system searches the condition
tables for a valid message record (e.g. for the document type) via the access sequence
assigned to the message type.
4.1. Message Determination Schemas

Path: SPRO -> Material Management-> Purchasing -> Message -> Output Control->Message
Schema->Define Message Schema for Purchase Order-> Maintain Message Determination
Schema
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4.2. Assign Schema to Purchase Order

Path: SPRO -> Material Management-> Purchasing -> Message -> Output Control->Message
Schema->Define Message Schema for Purchase Order-> Assign Schema to Purchase Order

Assign Output Devices to Purchasing Groups

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Condition Record

Output condition records provide instructions on how shipment documents should be

processed. Depending on entries in specific fields, you can: Select a particular medium for
output. Specify the time at which you would like the output to be sent.

Path: Navigation Path: SAP Menu-> Logistics -> Material Management -> Purchasing->
Master data->Messages-> Purchase Order-> MN04-> Create

Select the relevant key combination for the respective output type
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Check the output with PO (ME21N) and save it. Go to ME22N and print the PO by giving output
type.
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Output Determination for Some Other External Documents:

01) RFQ (Request for Quotation)
02) Outline Agreement
03) Scheduling Agreement
04) Inbound Delivery

Release Strategy for Purchase Order

Releasing a purchasing document means approving it. For this, our MM consultant can
create release procedures to be used. There is a vast number of options that can be used for
controlling the release of the documents.
Important information to know is that a purchasing document cannot be changed after it is
released. That means that only the final version should be released. Unreleased documents
(RFQ – request for quotation, PO – purchase order, scheduling agreement, contract) cannot
be processed further (convert RFQ to quotation, PO to goods receipt, invoice verification).
Process flow:
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Preparation of required objects for Release Strategy in SAP

When we start configuring release strategy in SAP, we need to define the combination of
parameters to trigger the release. This triggering criterion can be a combination of
Document type and Purchasing organization along with value depending on which the
number of release codes are assigned when the document is created. In SAP we have a run
time structure with name CEKKO (Communication Release Strategy Determination Purch.
Document) which provides all the possible list of fields using which a release strategy can be
configured. To view all this fields of the structure you can use transaction code SE12. In SE12
screen, in the database field provide the structure name CEKKO and click on Display button.

Configuration of Release Strategy for Purchase Order

Creating Characteristics of each attribute of Selection criterion
01) Z_DOC_SPA
Let us assume that we want to configure the release strategy based on the combination of three
fields. These fields are Document Type (CEKKO- BSART), Purchasing Organization (CEKKO- EKORG)
and Purchase order total value (CEKKO- GNETW). We need to create individual characteristic for each
of this field and then group them into a release class. Please follow the steps given below to create
characteristics.
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SPRO Menu Path: SPRO: Material Management -> Purchasing -> Purchase Order -> Release
Procedure for Purchase Orders -> Edit Characteristic

Transaction code: CT04

Provide the characteristic name and click on Create button to create the characteristic. Give
appropriate and meaningful name for each characteristic so that they become easy to identify in
further process.

In Basic Data of characteristic screen, provide appropriate description. If you want to configure the
release strategy for single document type, you need to select Single Values in Value Assignment block
and if it is required for multiple document type then select Multiple Values radio button.

Now, the fields are to be referred from CEKKO structure, we need to provide the reference to this
structure and corresponding field. Since this characteristic is created for document type, please
specify the structure and field name given in the below screen.
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As soon as you enter the structure name and field name, system will generate a warning message
“Format data taken from Data Dictionary (press enter)”. This warning message indicates that the
data type of the characteristic will be taken from the data dictionary of this structure in SAP.

Now navigate to Values tab and provide the document types which are required in this release
strategy.

Please note that in the characteristic values tab, these values are not available as a F4 selection. So,
they must be typed correctly and it should match exactly with the document types used.

We need to make sure that these characteristics are used only in class which is made up for Purchase
order release. For this purpose, we need to provide the restriction in characteristic. Provide class
type 032 in the restriction tab to achieve this.
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Creating Characteristics of each attribute of Selection criterion

02) Z_NETVALUETSPA
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For this characteristic, the values are to be defined in intervals as given in below screen.
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Creating Characteristics of each attribute of Selection criterion

01) Z_P_ORGSPA
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Creating Class for Purchase order Release

Once we have all the characteristics ready with us, we need to group them into a class. Please see
the below procedure to create the class.

SPRO Menu Path: SPRO: Material Management -> Purchasing -> Purchase Order -> Release
Procedure for Purchase Orders -> Edit Class

Transaction code: CL02.

In main screen of CL02 transaction, provide appropriate Class Name and click on Create button.
Make sure that the class type must be 032.

In main screen of CL02 transaction, provide appropriate Class Name and click on Create button.
Make sure that the class type must be 032.

In the detailed screen, provide appropriate description. In Same classification block please select Do
not Check radio button.
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Now the next step is to assign the earlier characteristics to this class. Please note that those
characteristics are restricted to be used only in class type 032 which type this class is to be created

Finally save the class. This concludes the first step for setting up the release strategy.

Define Release Strategy for Purchase Order

After the class is ready, the next is to configure the elements required in release strategy. Following
elements are required.

Release Groups
Release Codes
Release Indicator
Release Strategies
Workflow

Configure Release Groups

Use following SPRO path for configuring these elements of release strategy.
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SPRO: Materials Management -> Purchasing -> Purchase Order -> Release Procedure for Purchase Orders
-> Define Release Procedure for Purchase Orders.

When you click on this option, system will give sub options to proceed further. Please select Release
Group. Keep the cursor on Release Group and click on Choose button.

Click on New Entry button to create new Release Group. In new record, give appropriate Release
Group name as BP, in Class field give our Class name which we have created in above step. Click on
Save button to save your entry.

Configure Release Codes

Use following SPRO path for configuring these elements of release strategy.

SPRO: Materials Management -> Purchasing -> Purchase Order -> Release Procedure for Purchase
Orders -> Define Release Procedure for Purchase Orders.

When you click on this option, system will give sub options to proceed further. Please select Release
Codes. Keep the cursor on Release Codes and click on Choose button.
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Configure Release Indicator

Use following SPRO path for configuring these elements of release strategy.

SPRO: Materials Management -> Purchasing -> Purchase Order -> Release Procedure for Purchase
Orders -> Define Release Procedure for Purchase Orders.
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Configure Release Strategies

Use following SPRO path for configuring these elements of release strategy.

SPRO: Materials Management -> Purchasing -> Purchase Order -> Release Procedure for Purchase Orders
-> Define Release Procedure for Purchase Orders.

When you click on this option, system will give sub options to proceed further. Please select Release
Strategies. Keep the cursor on Release Strategies and click on Choose button.

Click on New Entries button and give your release group. After giving the release group, provide
appropriate Release strategy and description.

Now click on Release prerequisites button. In prerequisites screen, select prerequisites for each release code.
In the given screen shot, we are saying there is not prerequisite for release code 01 and for release code 02 it is
required that release id 01 has to be there. Once done, click on Continue button to save the settings.

01) Release Order If Price <= 1000

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The next step is Release statuses. Click on Release Statuses button. Here we are attaching the release ids for
each operational step. From the below screen it is clear that when the document is created when both the
release status is at initial condition.

When the first level of release is done means when it is released by a user having release code 01, the overall
status is still Blocked. When the document is released by a higher-level user having release code 02, the
documents overall status will be Released. Once it is done click on Continue button.

Next step is to select the classification values for the selected characteristics in release class. Click on
Classification button to proceed.
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Here it is required to select all the values from all the characteristics. If you have multiple values in
characteristic, you have to select the values which you want to involve in the release strategy. Select a
characteristic row and click on Choose button bottom.

Please note it is also possible to directly mention the values here provided Additional Values option is enabled
in your characteristic.

02) Release Order If the Net value is 1001 - 10000

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03) Release Order If the Net value is >10000

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Testing Of Release Strategy by Releasing the Purchase Order

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Release Strategy for Purchase Requisition

Purchase Requisition (PR) is an internal purchasing document in SAP R/3. It is used to give
notification to responsible department (purchasing/procurement) of requirements of materials
and/or external services and keep track of such requirements. PR must contain information about
quantity of a material or a service and the required date

In SAP we have a run time structure with name CEBAN (Communication Release Strategy
Determination: Requisition) which provides all the possible list of fields using which a release
strategy can be configured.

SPRO Menu Path: SPRO: Material Management -> Purchasing -> Purchase Requisition ->
Release Procedure for Purchase Requisition -> Edit Characteristic

Transaction code: CT04

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02

03

Creating Class for Purchase Requisition:

Once we have all the characteristics ready with us, we need to group them into a class. Please see
the below procedure to create the class.

SPRO Menu Path: SPRO: Material Management -> Purchasing -> Purchase Requisition ->
Release Procedure for Purchase Requisition -> Edit Class

Transaction code: CL02.

In main screen of CL02 transaction, provide appropriate Class Name and click on Create button.
Make sure that the class type must be 032.
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Define Release Strategy for Purchase Order

After the class is ready, the next is to configure the elements required in release strategy. Following
elements are required.

Release Groups
Release Codes
Release Indicator
Release Strategies
Workflow

Release Groups
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Release Codes

Release Strategies
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Version Management (Purchase Order)

The aim of version management is to keep track of all changes made to a Repository
object. Therefore, the system automatically creates versions: Before a Repository
object is modified
Version management for Purchase Orders is a critical component for efficient and
compliant procurement processes. By implementing version management practices,
organizations can reduce errors, improve transparency, and maintain control over
their procurement activities.
The Version Management facility enables you to generate and manage versions of
purchase requisitions and external purchasing documents such as PO’s. This is
particularly used for transactions extending over a longer period of time (for example,
in the procurement of capital goods), you may need to differentiate between various
versions of the purchasing document.
A version indicates the revision level of a document and provides the user with an
overview of the various changes that may have been made in the actual of time.

Path: SPRO -IMG – Material management – Purchasing- Version Management -set

up version management for external purchasing document.
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Set Up Version Management for External Purchasing Documents

In this step we give the document type and purchasing organization and set as an
Active Version for External Purchasing Document

Define the reasons code to be entered for the change:

Path: SPRO -IMG – Material management – Purchasing- Version management-

Define reason for change.

We will create a reason code as 0001- quantity change.

Next step is the very important step which tells the system when to trigger the
version based on the changes made in the PO
If the fields other than qty is needed in PO item level
Go to SE16N and enter the table EKKO (header level), EKPO (item level)
Get the field name MENGE (Po qty) and NETPR (net price) or any other for which
the version needs to be triggered when the changes are made. This Process is same
for remaining two reasons i.e. 0002 & 0003.
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Path: SPRO -IMG – Material management – purchasing- Version management- Set Up

Change Displays

ZPO -EKPO – MENGE- category F – check on version.

ZPO -EKET – EINDT- category F – check on version.
ZPO -EKPO – NETPR- category F – check on version.

1. Create a PO in ME21N
The Version for the PO is Successfully Trigger.
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External Service Management Configuration (ESM):

MM External Services Management is an application component within the Materials
Management (MM) module. It supports the complete cycle of bid invitation,
award/order placement phase, and acceptance of services, as well as the invoice
verification process.
This is an application component of Materials Management and it supports end to
end process of Purchase Requisition, Request for Quotation, Comparison, Purchase
Order (Service Order), Service Entry Sheet and Invoice Verification Process.
The following are the process for External Service Management:
Master Data:
Need to have Service Master for all the Service-related procurement for example –
Equipment Installation, Painting, Construction, Planned Maintenance etc.
Source of Supply:
Identification of Source of Supply. If the source is already exits, then you can use the
source for procurement of Service, else you can find the source and update.
Bid Invitation:
In case of new service, create the service master and raise Request for Quotation
(RFQ – with reference to Purchase Requisition or without reference). Forward the
RFQ to multiple vendors. Get the quotation from the Vendors and update the price
and other terms and conditions and them view the comparison price list.
Purchase Order:
Raise a Purchase Order with reference to Purchase Requisition and if release
strategy is in place, then approval flow will get triggered. Once approval is done, a
copy of Purchase Order will go to vendor as per the mail id in our system.
Service Entry Sheet:
Vendor upon receipt of the Purchase Order, will perform the services stipulated in the
purchase order. Once the service is carried out (either partially or in full), the
respective department will raise Service Entry Sheet for the services rendered. Upon
approval of the Service Entry Sheet next process can be initiated.
It’s a well-tested business process in SAP. ESM is a component of MM module; it
supports the complete cycle with procurement as well as invoice verification.
SERVICE MASTER CONFIGURATION
Service Master
Service master contains the service number, description, characteristics etc. This is
also called master data in External Service Management. It plays as master data
when you create a service entry sheet.
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Step 1: Service Number Range configuration

A service number is a unique number for each service entry sheet. It can be
maintained internally or externally.
T-code: ACNR

Configuration Path = SPRO- IMG- MM- External Services Management- Service

Master- Define Number Ranges

Step 2: Maintain Account Category Reference and valuation Class.

As we know, Account Category Reference is used for group together many
valuations class, so that we can use these valuation class for service master under
service category.
Valuation class is used to group together several material or service with their same
attributes. So that we don't need to maintain G/L for every service master.
T-code: OMSK

Configuration path = SPRO-IMG-MM-Valuation and Account Assignment-Account

Determination-Account Determination Without Wizard-Define Valuation Classes
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Step 3: Service Category Configuration

Service category is a most important area for service master record.
A. Define Organizational Status for Service Categories
Organizational status describes the attributes of service category, It specify the
organizational unit on where the service master will stored.
T-code OMV2

Configuration Path = SPRO-IMG-MM-External Services Management-Service

Master-Define Organizational Status for Service Categories

Step 4: Maintain Field Selection

Field selection is used for how the field are looking to you. It can set as editable/
non-editable and hide. you can set the field selection as per your business
requirement.
There are two steps for field selection of service entry sheet.
1. Define Field Selection for Service Master (Individual Maintenance)
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2. Define Field Selection for Service Master (List Entry)

Step 5: Maintain Attributes of System Messages

As we know system messages can maintain the message attributes as
Warning/Error.

Configuration Path = SPRO-IMG-MM-External Services Management-Define

Attributes of System Messages

You can set up the system message attributes here as per your business process.
You can more on clicking New Entries.
Message Contains E for Error, W for Warning, Blank for not populate.
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Step 7: Source Determination and Default Values

In this step you can maintain Source determination facility, default value of unit of
measure for service item level, material group for service, service specification line
number etc.....
There are two steps for that:
 Client Level
 Purchase Organization Level.
A. Client Level
You maintain the configuration here for all purchase organizations.

Configuration path = SPRO-IMG-External Services Management-Source

Determination and Default Values-for Client
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Maintain Service specification, default material group, default unit of measure and
following data as per your requirement.
B. Purchase Organization Level
If you maintain here any default value, then this is applied for only certain purchase
organization which you have used.

Configuration path = SPRO-IMG-External Services Management-Source

Determination and Default Values-for Purchasing Organizations

Step 8: Service Group Configuration

Service group is used for group together several service with their same attributes.
Service material group is similar to material group.
T-code OMSF

Configuration Path = SPRO-IMG-Logistics - General-Material Master-Settings for

Key Fields-Define Material Groups

Step 9: Division Configuration

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Division is grouping several materials, products or services to determine the sales

area and business place.
T-code OVXB

Configuration Path = SPRO-IMG-Enterprise Structure-Definition-Logistics -

General-Define, copy, delete, check division-Define Division

Service Document Configuration

Service documents are used during the service process at different stages Like
Purchase Order, Service Entry Sheet, invoice verification
Purchase order is used as a instruction document to vendor or service provider to
perform service with all terms and conditions.
Service Entry Sheet is used to confirm the service which is provided by the service
vendor or provider.
And the invoice verification used for to confirm the invoice raised by the service
provider with reference to the given purchase order.
Step 1: Service Purchase Order Configuration
A purchase order is a legal document for service provider/vendor to record individual
purchase with all terms and conditions. It’s also provided to vendor with the
reference document link to goods receipt and invoice verification.
Purchase Order has many types of Item category.
Like Standard, subcontracting, Stock transfer, Consignment, service etc etc....
We have to go with Service, which is on item category as D.
Number range:
We have to assign a number range to each Service Purchase order. This a unique
number for each order.
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We can use existing number or we can create a new number range to differentiate
service Purchase order.
We can use both external and internal number range for service purchase order.
New number range creation as follows:

Configuration Path = SPRO-IMG-Materials Management-Purchasing-Purchase

Order-Define Number Ranges

Document Type
We can use existing document type for service PO, or we can also create our own
document type for service purchase order.
Document type control these following areas:
Item Intervals
External and internal Number range
Field selection
Item category.

Configuration Path = Configuration Path = SPRO-IMG-Materials Management-

Purchasing-Purchase Order-Define Document Types
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Step 2: Service Entry Sheet Configuration

The Service Actually performed (which have been done already) by a service vendor
are recorded in Service Entry Sheet with reference to a PO.
The Invoice of services can be entered only when the service has been accepted.
After service acceptance the value will be automatically updated in specified G/L
accounts.
We have assigned a unique number for each service entry sheet. For that we need a
number range for service entry sheet.
Number Range
T-code OMH9

Configuration path = SPRO-IMG-Materials Management-External Services

Management-Number Ranges-Define Number Ranges for Service Entry Sheet

As similar you have to maintain number range for Service package

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Configuration path = Configuration path = SPRO-IMG-Materials Management-

External Services Management-Number Ranges-Define Internal Number Range for
Service Specifications

Here you can create your own number range and maintain it as external or internal,
or you can use existing one.

Number Range Assignment with service entry sheet.

Configuration Path = Configuration path = SPRO-IMG-Materials Management-

External Services Management-Number Ranges-Assign Number Ranges

Maintain the number ranges here for service package and service entry sheet.

Creation Of Service Master Record

T Code – AC03
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Creation Of Purchase Requsition

T- Code ME51N

Inventory Management
Inventory management is the process of efficiently monitoring the flow of products into and out of an
existing inventory in the warehouse. This process involves controlling the receipt of products in order
to prevent the inventory from becoming too high or too low.
 Inventory Management deals with Movement of Goods.
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In Inventory management we managing materials in warehouse or in storage location. Whenever we

procure materials or Goods from vendor, we will store the materials or goods in warehouse or in
storage place in the form of Quantity or Value base.
In SAP whether inventory is required or not, it will be controlled by material type and valuation area.
We maintain the Quantity and value for the material type and valuation area in OMS2 T-Code

In Inventory Management there are 4 Subgroups or Types

Goods Receipt (GR) - Inbound Inventory >> Credit the stock in the warehouse or Storage Location.
Goods Issue (GI) Cost Center - Outbound Inventory >> Debit the stock in the warehouse or Storage
Location.
Transfer Posting or Stock Transfer- Movement of Goods Between Different type of stock or the
movement of Goods From one Plant to another Plant / Storage to storage.
Physical Inventory- It deals with physical inventory in the plant and physical inventory mentioned in
the SAP system, and there checking and it should be equal as per the business requirements. In this
Process the respective person will check the material stock with physically. After that he will compare
the system stock And Physical Stock.

SAP MM – Physical Inventory Process

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Physical inventory is a process of determining that the inventory quantities are exact, or if there are
differences in quantity mentioned physically present and that mentioned in the SAP system.
Basically, after you are finished with physical inventory, your system and physical stock levels must
be the same. It is mandatory for legal reasons, and in the most of the times it is conducted once a year.
To simplify the process, check the below diagram, these are the most common steps for doing
physical inventory (not only in SAP ERP).

Besides the legal reasons it is extremely helpful having the correct stock quantities in the system
matching the physical stock. Management can have the correct information on the value of stock
materials. Not having the correct stock levels in the system means quite the opposite.
Management has the wrong picture on the financial aspect of the stock in possession. Now you see
that having clear and correct stock levels is of immense importance for a lot of processes in a
company. Now you will see how physical inventory is done in MM module.
Types Of Physical Inventory: -
 Periodic inventory
 Continuous inventory
 Cycle counting
 Inventory sampling
Periodic inventory:
In a periodic inventory, all stocks of the company are physically counted on the balance sheet key
date. In this case, every material must be counted. During counting, the entire warehouse must be
blocked for material movements.
Continuous Physical Inventory
In the continuous physical inventory procedure, stocks are counted continuously during the entire
fiscal year. In this case, it is important to ensure that every material is physically counted at least once
during the year.
Cycle Counting
Cycle counting is a method of physical inventory where inventory is counted at regular intervals
within a fiscal year. These intervals (or cycles) depend on the cycle counting indicator set for the
materials.
The Cycle Counting Method of Physical Inventory allows fast-moving items to be counted more
frequently than slow-moving items.

Inventory Sampling
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In Structure link MM – Inventory Sampling, randomly selected stocks of the company are physically
counted on the balance sheet key date. If the variances between the result of the count and the book
inventory balance are small enough, it is presumed that the book inventory balances for the other
stocks are correct.

Physical Inventory Process having following Steps:

1) Create Physical Inventory Document
2) Enter Counting Result
3) Post Physical Inventory Differences
1. Create Physical Inventory Document:
Create Physical Inventory Document: -

Path: - SAP Menu Path Logistics => Materials Management => Physical Inventory => Physical
Inventory Document=> Create

SAP T-code MI01

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MMBE Report:

Counting Physical Inventory Document: T-Code: MI04

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Processing the differences and posting the inventory document:

T-code: MI07
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MMBE Report:

MB5B Report:

Physical Inventory (PI) Movement Types

TYPE DESCRIPTION
701 Inventory difference in unrestricted-use stock
702 Goods Issue to Physical Inventory unrestricted stock
703 Inventory difference in quality inspection stock (MM-IM)
707 Inventory difference in blocked stock
711 Inventory difference in unrestricted-use stock (LE-WM)
713 Inventory difference in quality inspection stock (MM-IM)
715 Inventory difference for returns
717 Inventory difference in blocked stock (LE-WM)

SPLIT VALUATION
If a material is subject to split valuation, then the material is managed as several partial stock and each
partial stock is valuated separately. Every transaction that is relevant for valuation, be it a goods
receipt, goods issue, invoice receipt or physical inventory, is executed at the level of the partial stock.
Split Valuation Use: - For certain materials, it is necessary to evaluate the various stocks in a
particular valuation area separately, this configuration guide will provide configuration details for
activating split valuation for valuating in-house production and external procurement stocks.

Configuration of Split Valuation

01) Activation of split valuation
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Path: SAP Menu Path Logistics => Materials Management => Valuation and Account Assignment=> Split
valuation=> Activation of split valuation

02) Create Global Parameter

Path: SAP Menu Path Logistics => Materials Management => Valuation and Account Assignment=> Split
valuation=> Configure Split Valuation

Global Type for Inhouse

Global Type for External Purchasing

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Creating Global Categories

Activate The Global Category to Valuation Type

Activate The Valuation Category At plant level

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Split Valuation for Material

Creation Of Material Master
Create Material Master through MM01, and also select accounting views
Give Valuation Type In accounting view and save the material.
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Extend the material by creating new material master record from selecting Accounting 1 View

In the Organization Level Give the Valuation type Which required.

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In accounting 1 view enter the valuation class for that material and also check its price indicator

Purchase Order [ME21N]

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Goods Receipt [MIGO]

Stock Report [MMBE]