What is Procurement Logistics?
Procurement Logistics (MM) in
Procurement Logistics = Materials Management (MM)
 The heart of SAP R/3
SAP
Functions for purchasing, inventory management, warehouse
operations, invoice verification
Jon Atle Gulla
Used by Purchasing department and Warehouse
Integration with other SAP modules:
Presenting the functionality of SAP s Materials
Material needs from PM, SM, SD, etc. (requisitions,
Management Module
reservations)
Accounting documents sent to FI
Purchasing costs registered in CO
Curran, T. A. and A. Ladd:  SAP R/3 Business Blueprint 
Quality inspection of materials part of QM
Understanding Enterprise Supply Chain Management. Chapter 7,
 Procurement Logistics , Prentice-Hall, 2000. Materials procured in projects from PS
MM Organizational Structures SAP Procurement Structures
Motor Sports
client
International
NB! floating
purchasing
company
3000 4000
organization
code
MSI Norway MSI Germany
purchasing
3000 MSIN 4000 MSIG
CCM
organization
Purchasing Purchasing
3000 3100 4000
plant
Trondheim Bergen Berlin
storage
0001 0002
location
Organizational Structures: def. 1 Organizational Structures: def. 2
Client:
Company Code:
Highest hierarchical level in SAP
Represents a legal/tax entity
All business areas to be integrated into SAP should be
Level of external reporting or legal sets of books
under one client
Maintains its own profit and loss statements and
Some control tables (e.g. currency rates, measurement
balance sheets
units
Some master data: (e.g. basic vendor and customer data)
Example: Hydro Agri Europe solution has 46 legal
company codes
Usage:
Can be used to differentiate between a Development,
Quality Assurance, and Production system within R/3
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Organizational Structures: def. 3 Organizational Structures: def. 4
Plant:
Purchasing organization:
Manufacturing facility, warehouse, or location that
Responsible for procurement for one or more plants
stocks, manages, and valuates inventory
Responsible for negotiating pricing and delivery terms
Usually a physical site
Assigned to a company code where inventory is legally
Assigned to a company code
tracked or costs are legally incurred (except for floating
One or more purchasing organizations assigned to plant
purch. org.)
Materials defined at plant level
Vendors defined at purchasing organization level
Usage:
MM procures materials to plant
Two typical configurations: PM maintains facilities at plant
PP produces products at plant
One purchasing organization for each company
SD sells products from plant
One purchasing organization for each plant
Organizational Structures: def. 5 Procurement of Stock Material
When materials are needed, requisitions are sent to the purchasing
Storage location:
department
Location within a plant where inventory is stored
The materials are ordered and later received into the warehouse
Usage: Stock value is updated
The invoice is matched against what was received and later paid by
A physcial storage place at plant
the financial department
Grouping of materials in types or classes
Value chain:
Purchase Goods Quality Invoice
Purchasing group: Warehouse
requisitionPurchasing receipt inspectionverificationReporting
Corresponds to individual purchasers or group of
Vendor
purchasers certification
A purchasing organization contains one or several
purchasing groups
A h si m b s sibl f t i
Procurement of Stock Material: cont. Procurement of Stock Material: cont.
XOR
Requirement Planned orders Preq. with Preq. is
occurred created vendor is marked for req.
created for quotation
Requisition Planned
Processing of
Any department processing to order Production
RFQ to
stock material conversion
vendor
Preq. with Planned order Requests for
Order
contract order converted to quotation sent
Purchasing
arrived
id created Preq. to vendors
XOR
AND
Vendor
Purchase
quotation
requisition Purchasing
processing
assignment
XOR
Quotatin is Rejection is
selected sent
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Procurement of Stock Material: cont. Procurement of Stock Material: cont.
Preq. Contract Scheduling Material
with vendor should be agreement is arrived
AND AND
is created created to be created
OR
XOR XOR
Goods
receipt Warehouse
Contract Scheduling
processing
processing for agreement proc.
stock material for stock mat.
XOR
Scheduling
Contract is
Purchasing
agreement
sent AND
is sent Material post.
XOR
Goods are
to stock in
Material is Transfer order
to be returned
XOR
quality inspection
placed in created
stock automatically
Purchase Quality
order process processing Placement in
for stock mat. storage
processing
XOR
Purchase order
Material is
Material is Material is
is transmitted
placed in
not accepted accepted
stock
Procurement of Stock Material: cont. Procurement of Consumable Materials
Invoice with Invoice w/o
ref. has ref. has
Some materials are not to be stored in stock
arrived arrived
production materials
AND
project materials
XOR
replacement items in plant maintenance
Invoice
Accounting SAP implementation:
processing
Consumable materials not linked to any stock account
XOR
Procement costs not included in inventory accounting, but
Invoice posted
Invoice is
and released
posted to job order or cost center
not accepted
for payment
Vendor
Example:
processing
Pencils, buying a Handspring Visor on the project s budget
Procurement of Consignment Materials Procurement of Subcontract Work
Consignment material Subcontract orders:
owned by supplier outsourcing of manufacturing process
stored at customer s facility company purchases finished product, but provides some
or all of the materials to the subcontractor
Purpose:
Inventory value of produced material:
faster maintenance delivery
net purchase order value + value of component materials
customer do not need to pay before item in production
posted out of inventory
avoid production delays
SAP implementation:
SAP implementation
create subcontract purchase order which specify
used like any other material type
component materials to send to subcontractor
vendor-owned inventory tracked like any other stock type
when material is received, the quantities and values of
not valued on the company s books before issued to requester
component materials are posted out of inventory
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Conclusions
Stock Transfer Processing
Stock transfer:
Procurement logistics = Materials Management:
Handling intersite inventory transfers of materials
Procurement of stock materials/
 Transport orders are used for transfers of stock
consumables/consignment materials, subcontracting,
between sites (plants)
stock transfers, inventory management, invoice
management
Procurement price:
valuation of material + costs of delivery Higly integrated with other SAP modules
Planning system may automatically generate
Procurement logistics functionality:
transport orders
SAP organizational structures:
SAP implementation: client, company code, purchasing organization, plant,
storage location
Convert planned transfer to planned order, receive
material at issuing plant, issue material, process goods
SAP business processes described as EPC models
receipt at receiving plant
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