SAP MM Introduction - Procurement Process of SAP MM

What is SAP MM?

SAP MM (Material Management) is one of the most important modules in SAP ERP software program. SAP MM software module supports the procurement and stock capabilities going on in each day organization operations.

This MM module incorporates many elements consisting of shopping, goods receiving, cloth storage, consumption-based plans, and stock.

It supports all levels of materials control, substances making plans and control, purchasing, goods receiving, stock control, and invoice verification.

Procurement process:

Every agency acquires material or offerings to complete its enterprise needs. The process of buying materials and acquiring offerings from providers or dealers is procurement. Procurement process has to be completed in any such way that it's far ordered incorrect quantity, with a proper fee on the proper time. It is subdivided into following components:

·         Basic Procurement

·         Special Procurement

Basic Procurement:

It is a system of acquiring goods or offerings in the right quantity, on the proper charge at the right time. So the technique of getting offerings, materials, and equipment from a supplier (dealer), at the proper rate on the proper time in the proper amount is named as Procurement.

Procurement Lifecycle

The following are some sequential steps followed by most modern organizations. They are described below:

Requirement and Information Gathering

Gathering information about the product and its quantity is the first step that was taken by the procurement process. After that, it is necessary to look for suppliers who can satisfy the requirements for required products and services.

Supplier Contact

After accumulating requirements one will look for the suppliers who can fulfill the requirements. Based on that citation request or records request can be made to providers or direct touch can be made with them.

Background Review

Once the supplier is understood product/service high-quality is checked, and any requirements for services which include set up, guarantee and its protection are investigated. Some samples of the goods may be obtained for, the first-rate examination.

Negotiation

Some negotiations with providers, made concerning charge, availability and shipping time-table of the goods/services. After this, a settlement is signed that could be a binding legal document among provider and ordering party. A settlement will include all necessary facts like fee and quantity of material, shipping date, and so forth.

Order fulfillment

The 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 by 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 service or product is to be re-ordered, a corporation enjoys with companies and provider issuer is reviewed. If the products or offerings are to be re-ordered, the enterprise makes a decision whether or not to reserve from the previous dealer or reflect on consideration on new providers.

Special Procurement:

Special stocks are shares which can be managed in another way as those stocks did no longer belong to the organization and those are being saved at some precise area. Special procurement and special stocks sorts are divided into the subsequent regions.

Consignment Stocks

Material that is available in our store still belongs to the vendor of the material. Utilizing the material from consignment stocks results in paying to the vendor.

Third-party processing

In third-party processing, a company passes on a sales order to partner outside dealer (vendor) who sends the products immediately to the patron. The income order isn't processed by your company, but via the seller (dealer). Third-party items may be entered in purchase requisitions, buy orders and income orders.

Pipeline handling

In pipeline handling, the enterprise wishes not to reserve or store the material involved. It is offered as and whilst required through a pipeline (as an example, oil or water), or another fashion of cable (including energy). The fabric that is fed on is settled with the vendor (dealer) on an ordinary basis.

Returnable Transport Stock

The enterprise orders items from a vendor. The items are introduced with returnable delivery packaging (pallets, packing containers) that belongs to the seller and is saved on the client premises until they return it to the business enterprise.

Subcontracting

The vendor (the subcontractor) gets components from the ordering birthday party with the help of which it produces a product. The product is ordered by way of your company through a purchase order. The components required through the seller (vendor) to fabricate the ordered product are listed in the purchase order and provided to the subcontractor.

Stock transfer using a stock transport order

Goods are procured and provided within an organization. One plant orders the products internally from some other plant (receiving plant/issuing plant). The goods are procured with a special form of purchase order - the inventory delivery order. You'll be able to request and monitor the switch of goods with a stock delivery order.

The above are the steps that are essential in those components.