This title has been written with the perspective of giving its audience in depth insight into the application and usage of SAP ERP package ECC 6.0 in managing supply, sourcing, and inventory.
SAP has dominated the world of ERP market and is being used in every other small or major organization. Success of SAP is attributed to its adherence to GMP (good manufacturing practice) and best business practice in every industry sector. SAP has standardized business and finance process and their integration worldwide due to its dominance.
This title covers all the business process and concept pertaining to purchase management, inventory management and vendor invoice verification to enable the audiences to use SAP MM (materials management) module effectively at the level of user, management and/ or as a consultant.
This title is divided in ten chapters, a section on interview Q&A and an annexure. Chapters are as given below:-
1. Materials Management: Manage Sourcing, Supply and Inventory through SAP
2. Business processes in procurement
3. Inventory management, valuation and Physical inventory
4. Financial Accounting Integration with Materials Management
5. Logistics Invoice Verification
6. Country India Version (CIN)
7. MM & CIN Implementation Guide (CD)
8. Materials Requirement Planning
9. Materials Management and Quality Management Integration
10. Supply Chain Management through SAP: An introduction
11. Annexure: An Annexure at the end contains following case studies.
§ SAP Project Implementation
§ SAP Implementation in Agro Industry
§ Post Merger integration of SAP
First chapter outlines the functions of sourcing, supply and inventory management. It also covers scope of this book and coverage of SAP features in this title.
In the Second chapter, business process in procurement, organization structure, and creation of purchase order is explained in detail from the system perspective. Purchase orders for stock item, non-stock item and for service, have been explained. Master data, which is required before creation of any purchase order, like material master, and vendor master, is also discussed conceptually and from system point of view. This chapter also addresses the purchasing master data i.e. purchasing info record and source list, source of supply (contract, scheduling agreement, source list and purchasing info record) and source determination. Special procurement processes like subcontracting, purchase order creation, etc. have been explained in detail. Return purchase order has also been discussed. Lastly, release strategy procedure for purchase order has also been discussed conceptually and from system point of view.
In the Third chapter, inventory management, valuation and physical inventory processes have been discussed. Inventory management processes like goods receipt, goods issue, stock transfer, transfer posting, reservations, Subcontracting processes, which includes goods movement like issue of raw material to subcontracting vendor from own stock as well as from material supplier and receiving finished goods from subcontracting vendor, has been discussed from BOM creation to goods receipt, step by step. Special forms of inventory management like split-valuation and non-valuated material has been discussed from business need, accounting need, concept, and system point of view. Ad-hoc physical inventory process and cycle counting process has been discussed. A very strong use of SAP is its reporting power using transactional data, collected through various inventory transactions. Need of report from purchase, inventory and accounting point of view has been explained. Various transaction codes are also mentioned for reporting.
Chapter four addresses most important and critical feature of SAP i.e. materials management and finance integration. This chapter is divided in three parts, automatic account determination (AAA), pricing procedure and tax procedure. Automatic account determination is an automatic process of determining general ledger account during goods movement that involves accounting. AAA leads to automatic debit and credit entry in respective general ledger accounts. Pricing procedure and tax procedure are integrated with purchase order, goods receipt and vendor invoice verification. During the creation of purchase order, purchaser specifies the basic price of material, any discount, or surcharge, delivery cost like freight, custom duty etc. through pricing procedure and tax applicability like sales tax through tax procedure. From pricing procedure and tax procedure theses values flow to respective general ledger accounts, this helps accounts in vendor liability reconciliation and filing tax returns. Sometimes input sales tax is available for credit against the output sales tax. This is also accomplished through tax procedure.
Chapter five is about vendor invoice verification. In SAP, this process is known as LIV (logistics invoice verification). This is the third and the last step in the procurement process. After this step payment process to vendor goes to finance process. During LIV vendor is credited and clearing account is debited (which was credited during GR (goods receipt)). There are various types of invoices like material invoice from material supplier vendor, freight invoices from freight vendor, customs invoice from customs house and so on. By the time, accounts receive the invoice; due to market condition, actual price of material of freight might have changed. The basic price and the delivery cost like freight, which were mentioned in the purchase order, had been negotiated much before. LIV takes care of all the variation in prices and accordingly adjust the inventory value, which was posted during the goods receipt process. LIV also has the provision of subsequent credit and subsequent debit and credit memos towards the vendor.
Chapter six covers, CIN (Country India) Version, which covers treatment of India
Chapter seven explains the integration between MM and QM module. Integration between Materials Management and Quality Management (QM) gets reflected in Procurement Cycle and Inventory Management. At every step of procurement cycle (Purchase Order, Goods receipt and Logistic Invoice Verification), QM affects the process, from controlling source of supply, supply from approved manufacturer, creation of purchase order, goods receipt till the vendor is credited through LIV. Payment may be blocked based on the QM settings. Various goods movement also causes inspection lot to be generated. Batch status functionality is also controlled through QM module.
Chapter eight describes the process of material planning with SAP. The main function of material requirements planning is to guarantee material availability, that is, it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. This process involves the monitoring of stocks and, in particular, the automatic creation of procurement proposals for purchasing and production. The role of material requirements planning is achieved by using various materials planning methods which each cover different procedures, to monitor stocks and, in particular, to automatically generate order proposals for purchasing and production (planned orders, purchase requisitions, or delivery schedules).Effective inventory management through SAP makes the base for material planning, which further improves the procurement and inventory management over the period of time. Material planning constitutes of demand management, stock balancing and material requirement planning.
This title comes with the Implementation guide (IMG) on a CD. IMG is meant for those who want to become consultant in SAP MM module. This chapter explains systematic process of configuring materials management module. Configurations of module are lengthy and integrated process. Every next step is heavily dependent on every previous step. Flow of configuration is as follows: definition and assignment of organization structure, master data configuration, definition of purchase documents, their number ranges, and their controls, creation of pricing procedure and their determination, creation of tax procedure and its determination, output message, inventory management, goods movement type, goods movement screen layout, automatic account determination, incoming invoices, tolerance limit, default tax code, purchase order text control during invoicing etc. Configuration of the system is always a tricky task and is done after business blueprint phase of the system implementation project.
Process Integration is the key because of which, SAP ECC has become the engine of supply chain management. It integrates all the stakeholders and fragmented sub processes and events, to deliver best to the customer. Chapter ten, (Supply chain management through SAP: An Introduction) briefly describes how supply chain is managed through SAP. Author has tried to dissect the various layers and components of supply chain and describes how the various modules of SAP fit into them to integrate and strengthen supply chain.
Annexure contains analysis paper (Comparative study of Agro and non-agro based industries) on challenges pose by Agro industries, a case studies on ERP Implementation in Agro-industry and Post merger integration of ERP.
In short, this title on Managing Supply, Sourcing, and Inventory would enrich all - users, management, and consultants.
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