bbp emami mm_v2 final
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BBuussiinneessss BBlluuee PPrriinntt
MATERIALS MANAGEMENT
RGS MM TEAM
S.no RevisionCreated
Date
Last
modifiedRemarks
1. 1.0 26.06.2011 30.06.2011
.
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BUSINESS BLUEPRINT DOCUMENT
MMMAAATTTEEERRRIIIAAALLL MMMAAANNNAAAGGGEEEMMMEEENNNTTT
Version: 1.0
Date:
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Document Information
Document Name Business Blue Print
Title PRP_ MM _BBP_Business Blueprint_ Material Management
Document Purpose Requirement gathering and Mapping to SAP
Key Words
Document Status
Contact for
Enquiries
Document Change Control :
Relea
se
Descriptio
n
Created
byDate
Review
ed byDate
Approve
d byDate
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ContentsRGS MM TEAM………………………………………………………………………2
MATERIALMANAGEMENT....................................................................................
3
EXECUTIVESUMMARY…………………………………………………………..4
ORGANIZATIONALSTRUCTURE.........................................................................
8 REQUIREMENTS/EXPECTATIONS………………………………………………10
TO BE STRUCTURE…………………………………………………………………11
CHANGES TO EXISTING ORGANIZATION
PROCESSES………………………………………………………………………….11
PLANTS AND STORAGE LOCATIONS…………………………………………...11
PLANTS………………………………………………………………………………12
STORAGELOCATIONS……………………………………………………………..12
PURCHASINGORGANIZATIONS………………………………………………….13
PURCHASING ORGANIZATIONS FOR EMAMI
…………………………………...13
PURCHASINGGROUPS……………………………………………………………..14
MASTER DATA……………………………………………………………………..14
AS IS PROCESS…………………………………………………………………….14
DETAILS IN MATERIALS MASTER………………………………………………15
INDUSTRY SECTOR………………………………………………………………15
MATERIAL TYPE………………………………………………………………,,,,,,,15
MASTERIAL CODIFICATION…..…………………………………………………16TRANSACTION CODE…………..…………………………………………………17
DESCRIPTION OF IMPROVEMENTS…………………………………………….17
VENDOR MASTER……………………………………………………………..…17
VENDOR GROUP………………………………………………………..…………18
PARTNER FUNCTIONS……………………………………………………………18
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VENDOR.RECONCILIATION.ACCOUNTS………………………………………18
TRANSACTION CODE……………………………………….……………………19
DESCRIPTION OF IMPROVEMENTS
PURCHASE INFO RECORDS…………………….………………………………20
TRANSACTION CODE……………………….…………………………………….20
DESCRIPTION OF IMPROVEMENTS…………………….………………………20
SOURCE LIST………………………………………………………………………20
AS-IS……………………………………….…………………………………………21
TO-BE…………………………………………………………………………………21
TRANSACTION CODES
PROCUREMENT FLOW……………………………………………………………21
REQUIRED BUSINESS PROCESS FLOW DIAGRAM FOR EMAMI
REQUIREMENTS/EXPECTATIONS FROM THE
PROCUREMENT………………………………………………………………………22
PURCHASE REQUISTIONS…………………………………………………………23
PURCHASE REQUISTION DOCUMENTS………………………….……………..…24
PROCUREMENTS TYPE……………………………………………………………24
PURCHASE REQUISTION NUMBERING…………………………………..….….24
ITEM NO.INPURCHASE REQUISTION………………………………..………….…25
PURCHASE REQUISTION RELEASE PROCEDURE………..……………………....25
ATTACHEMENTS IN PRDOCUMENT………………………………………….……25
RFQ……………………………………………………………..……………………..…26
QUOATATION………………………………………………………………………..…26
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RFQ TYPE………………………………………………………………………………. .26
PROCUREMENT TYPE………………………………………..……………………..…27
NUMBER RANGE…………………………………………………………………….…27
ATTACHEMENTS IN A RFQ DOCUMENT……………………..…………………..…27
IMPROVEMENTS
PURCHASE ORDER…………………………………..………………………………27
AS-IS………………………………………………………………………………….….27
TO-BE……………………………………………………………………………………28
PURCHASE ORDER…………………..…………………………………………….…28
PROCUREMENT TYPES………………………………………………………….…28DESCRIPTION OF IMPROVEMENTS……………………………….……………..…28
OUTLINE AGREEMENT…………………………………………………………...28
CONTRACT…………………………………………………………………………... .29
AS-IS………………………………………………………………………………….…29
TO-BE……………………………………………………………………………..….…29
NUMBER RANGES………………………….…………………………………… ..….29
RELEASE STRATEGIES……………………………………………………….……..29
SCHEDULING AGREEMENT……………..…………………….…………………..30
NUMBER RANGE………………………………………………………………………30
SERVICES PROCUREMENT……………….……………………………………….31
SPECIAL ORGANIZATIONAL CONSIDERATIONS…………………………...……31
TO-BE……………………………………………………………………………………31
NUMBER RANGE…………………………………………..……………………….…31
RELEASE STRATEGIES……………………………………………………………….31
INVENTORY MANAGEMENT………………………………………………………32
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GOODS RECIEPT……………………………………………………………………..37
TYPE OF GR/MATERIAL DOCUMENT……………………………………………...37
NUMBER RANGE……………………………………………………………………...37
ACCOUNT MOVEMENT……………………………………………………..………..38
DESCRIPTION OF IMPROVEMENTS
GOODS ISSUE…………………………………………………………………………39
NUMBER RANGES…………………………………………………………………….40ATTACHEMENTS IN A GI DOCUMENT…………………………………………….40
IM (GOODS RETURNS TO VENDOR)………………………………………………..41
REQUREMENTS/EXPECTATIONS………………………………………………… ..42
GENERAL EXPLANATIONS………………………………………………………….42
SPECIAL ORGANIZATIONAL CONSIDERATIONS………………………………...43
SOLUTION IN SAP …………………………………………………………………....43
STOCK TRANSFER (PLANT TO PLANT)…………………………………………44
TRANSFER POSTING (STORAGE LOCATION TO STORAGE LOCATION)-
TCODE:MB1B…………………………………………………………………….…….45
ONE STEP AND TWO STEP STOCK TRANSFER…………………………………...45
NUMBER RANGES…………………………………………………………..………...45
PHYSICAL INVENTORY VERIFICATION………………………………………..46
REQUIREMENTS/EXPECTATIONS………………………………………………….46
TO-BE STRUCTURE…………………………………………………………………...47
PHYSICAL INVENTORY PROCEDURES…………………………………………….47
PHYSICAL INVENTORY……………………………………………………………...48
CREATE A PHYSICAL INVENTORY DOCUMENT. (TCODE MI01)…….………..48
BLOCKING MATERIALS FOR POSTING …………………………………………...48
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INVENTORY COUNT………………………………………………………………….49
ENTERING THE COUNT RESULTS IN THE SYSTEM (TCODE: MI04)…………...49
POSTING INVENTORY DIFFERENCES (TCODE: MI07)…………………….…..…49
Batch Management……………………………………………………………….…….50
As-Is Process…………………………………….………………………………………50
To-Be…………………………………………………………………………………….50
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EXECUTIVE SUMMARY
SAP Implementation at EMAMI is being carried out using standard ASAP (Accelerated
SAP) methodology suggested by SAP for implementation.
The consultants from RGS Ltd. referred Q & A DB (Question & Answer Database) as
suggested in ASAP methodology for capturing the requirements from EMAMI process
owners, core users and core team members. A series of various meetings were
conducted with EMAMI process owners, core users and core team members to capture
AS-IS process followed in EMAMI. After that SAP orientation sessions were
administered for the process owners, core users and core team members of EMAMI to
give them orientation towards the standard SAP process functionality.
Orientation sessions were followed by exhaustive and interactive business workshops
with EMAMI process owners, core users and core team members, in which RGS
consultants demonstrated the standard SAP process functionality cycles suitable for
EMAMI group and got confirmation from the process owners, core users and core
team members regarding the “To- Be” processes to be followed in EMAMI after SAP
implementation. These proposed “To-Be” processes, captured during business
workshops as well as meetings with EMAMI process owners, core users and core team
members, are consolidated in this business blueprint document.
This business blueprint is prepared based on the inputs given by EMAMI process
owners, core users and core team members till the date of submission of the business
blueprint. Configuration of SAP modules for the processes of EMAMI group will be
done as mentioned in the business blueprint. Any future changes in these processes
documented and agreed upon as part of this blueprint sign-off will be addressed
strictly through Change Management Procedure as mutually agreed in the Contract.
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ORGANIZATIONAL STRUCTURE
AS – IS SITUATION
EMAMI COMESTICS
GROUP
KOLKATA
PLANT
oc1 Stloc3 Sloc1
PONDICHERRY
PLANT
EMAMI MAN
COMPANY
EMAMI MARK
COMPANY
CHENNAI
PLANT
MUMBAI
PLANT
Sloc2 Sloc1 Sloc2 Sloc3 Sloc1
CEN PURCH
OFFICE
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EMAMI Manufacturing Company consists of two plants located in KOLKATA and
PONDICHERRY which manufactures Cosmetic Products.
EMAMI marketing Company Consists of two Plants located at CHENNAI and MUMBAIWhich is responsible for Distribution across India.
The purchase department is the organization, which handles the acquiring of goods
or services to fulfill the goal of enterprise. It ensures that the materials or services
are procured at the best possible total cost of ownership to meet the needs of the
purchaser in terms of quality, quantity, time and location.
The structure provided above demonstrates the purchasing department of EMAMI. It
consists of three purchasing points responsible for procurement of all the materials
in all the plants across the two companies.
There are 3 storage locations in Kolkata plant and the Pondicherry plant which can
store Raw materials, Semi Finished and Finished Goods separately in each storage
location. There is an individual storage location for each plant (Chennai & Mumbai)
under marketing company which stores Finished goods.
REQUIREMENTS/EXPECTATIONS
Material management organization structure should support:
Purchase of materials, Vendor Consignments and Services for the manufacturing units
of EMAMI at Kolkata and at PONDICHERRY
Purchase of administration related items.
Inter plant stock transfer orders.
Intra company stock transport orders
Inventory Management.
Subcontracting
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A EMAMI production line has two manufacturing plants at Kolkata and Pondicherry
where the Manufacturing of Cosmetic products is made. All the Plants has a common
procurement division.
TO-BE STRUCTURE
PL01Plant
RM01 FG01
FG01
PL02
Plant
EM01
Company Code
EM02
Company Code
PL03
Plant
PL04Plant
SF01 RM01 SF01FG01
FG01
CP01
Purchasin Or
EMAMI COMESTICS
GROUP
KP01
P.Org
PP01
P.Org
Storage Location
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EXISTING ORGANIZATION PROCESSES
Three purchasing organizations are responsible for entire purchasing
activities.
Three purchase groups are there to monitor separately the purchase of
materials in place of purchase team.
3 storage locations are there for each plant under manufacturing company
and 1 storage location for each plant under Marketing Company which helps
in proper tracking and monitoring of stocks.
PLANTS AND STORAGE LOCATIONS
A plant is an organizational unit within Logistics, serving to subdivide an enterprise
according to production, procurement, maintenance, and materials planning. In all
transactions and related documents, the plant is taken as the reference with respect
to which the material is maintained and valuated.
A storage location is a location within the plant where inventory is stored.
Storage locations are defined for each plant to keep stock of materials.
Separate storage locations are not defined for under test, approved & rejected
material, Vendor Consignments because these are taken care by stock types in SAP.
Storage location is the level at which physical Inventory will be done
Based on these criteria following plant and storage locations will be mapped in SAP:
PLANTS
For naming convention of SAP code for Plant following logic is used
Its four digit code
First two characters from left PL01 denotes Plant location
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Last digit denotes numbers
Plants under EM01 Company code
Plants under EM02 Company code
Description Geographic
Location
SAP Code
CHENNAI Plant CHENNAI PL03
MUMBAI Plant MUMBAI PL04
STORAGE LOCATIONS
A storage location is the place where stock is physically kept within a plant. Material
can be stored in more than one storage location within a plant. A storage location can
be a physical or logical.
The Storage Location would be assigned to a plant.
For naming convention of SAP code for Storage Location following logic is used
Its four digit alphanumeric code
First two characters from left storage denotes storage
Last characters denotes numbers.
Description Geographic
Location
SAP Code
PONDICHERRY Plant PONDICHERRY PL01
KOLKATA Plant KOLKATA PL02
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Storage
LocationStorage Location Type
RM01 Raw Materials
SF01 Semi Finished
FG01 Finished goods
PURCHASING ORGANIZATIONS
Purchase Organization is an organizational unit within logistics in SAP, which
subdivides the company to facilitate efficient and effective purchasing. A Purchase
Organization procures materials and services, negotiates conditions of purchase with
vendors, and bears responsibility for such transactions.
A purchasing Organization can be divided into several Purchasing groups that are
responsible for different operational areas.
Purchasing Organization has its own Info Records and Conditions for pricing.
Purchasing Organization has its own vendor master data.
All items in an external purchasing document, that is, request for quotation, purchase
order, contract, or scheduling agreement, belong to a Purchasing Organization
The purchasing Organization serves as the selection criterion for lists of all purchasing
documents.
PURCHASING ORGANIZATION FOR EMAMI
At EMAMI, the purchasing activity is carried out by Central purchase organization andplant specific Pur.Organizations located at Company code level and plant level
(Kolkata & Pondicherry) respectively.
For naming convention of SAP code for Purchase Organization following logic is used
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First two letters from the word for purchase organization and digit 01 for number of
Pur Org.
There will be three purchase organizations in EMAMI with functions as described
below:
CP01: This purchase organization will deal with all the purchase activities for all the
raw materials and special procurement of materials at all the plants in two companies
as a referral Purchase Organization.
KP01 & PP01 are plant specific Pur.Organizations which are responsible for purchasing
activities at their respective plants.
PURCHASING GROUPS
A purchase organization can be subdivided into purchase groups, which are
responsible for certain day to day-purchasing activities. A Purchasing group can be a
buyer or group of buyers responsible for procuring the material.
A purchasing group can be an individual or a group of individuals responsible for
procuring the materials. It facilitates approval processes for purchasing documents.
Local purchases for different operational areas will be handled through different
purchasing Groups. To facilitate authorizations at this level for proper control over
purchases, release procedures will be used.
SAP CODE PURCHASE ORGANIZATION
CP01
Central
Purchasing Organization for all
plants.
KP01 P.Org. for KOLKATA
PP01 P.Org for Pondicherry
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Central office will be able to generate reports separately for both local and central
purchases using these purchase groups. Purchasing Groups for EMAMI are definedbased on the type of material being procured.
Purchase Groups: Purchase groups i.e. group of buyers who will be carrying out
different purchase activities for the above-mentioned purchase Organizations.
SAP CODE PURCHASER TYPE
001 Herbals
002 Chemicals
003 Packaging
MASTER DATA
Master data, which may include reference data, is information that is key to the
operation of business. This key business information may include data about
customers, products, employees, materials, suppliers, etc. which often turns out to be
non-transactional in nature. In this regard, master data can support transactional
processes and operations, but its use is certainly not limited to such
(analytics/reporting is another area greatly dependent on an organization's master
data). Master data is often used by several functional groups and stored in different
data systems across an organization and may or may not be referenced centrally;
therefore, the possibility exists for duplicate and/or inaccurate master data.
TYPES OF MASTER DATA
Material Master
Vendor Master
Info Record
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Source List
MATERIAL MASTER
AS-IS PROCESS
There is no standard material codification system in place; each department is using
their own derived materials codes.
To-BE PROCESS
The Material/Service code will be a 10 digit numeric code and External. This code will
not be the same as is used by the organization in the current scenario. The currently
used material number can be maintained in the material master in Old Material
Number Field.
The master data will be maintained centrally i.e. same material code across various
plants. The basic data will be the same for all plants but plant specific data will be
created for each plant separately. In that case the material number will be common
for all the plants irrespective of the company to a plant belongs to.
If the data required for a particular function is not maintained in the material master,
that function will not be triggered, for example, if purchasing data does not exist for a
material system, it will not allow creation of any purchasing document for that
material.
DETAILS IN MATERIAL MASTER
INDUSTRY SECTOR
Industry sectors are created in the Client level and have control functions in the R/3System. For example, it is a factor determining the screen sequence and field
selection in a material master record. Once an industry sector has assigned an
industry sector to a material, it cannot be change the subsequently. The standard R/3
System contains the following industry sectors. The ID used to identify the industry
sector internally appears in parentheses.
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MATERIAL TYPE
Materials with the same basic attributes are grouped together and assigned to a
material type. This allows managing different materials in a uniform manner in
accordance with company's requirements. The material type determines certain
attributes of the material and has important control functions. For example, it is a
factor determining the screen sequence and field selection in a material master
record. When a material master record is created, the material type determines:
Whether the material number can be assigned internally or externally.
The number range from which the material number is taken.
Which screens appear and in what sequence.
Which departmental data may be entered.
What procurement type the material has; that is, whether it is manufactured in-house
or procured externally, or both.
Together with the plant, the material type determines the material's inventory
management requirement; that is:
Whether changes in quantity are updated in the material master record
Whether changes in value are also updated in the stock accounts in financial
accounting
In addition, the accounts affected by a material entering or leaving the warehouse
depend on the material type. The material types that will be used are,
MATERIAL CODIFICATION
Material types and Number range for
EMAMI.
SAP Material Description SAP Code / Number Account cat. Ref
Material Type Description
ROH Raw materials
HALB Semi finished
FERT Finished materials
VERP Packing
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Type Range
ROH Raw materials 200001-299999 0001
HALB Semi finished 300001-399999 0008FERT Finished materials 100001-199999 0009
VERP Packing Internal Alphanumeric 0010
DESCRIPTION OF IMPROVEMENTS
Centralized material master record will have following benefits:
Requirement of a material in a certain plant will be confirmed by the availability of the
same material in a different plant.
Better control on various functions for example a material can be blocked for
procurement if required while other activities will still be in place.
Instantaneous availability of data for all the functional groups
Security of the master data is improved
Uniform codes ensures better planning
VENDOR MASTER
Business transactions are posted to various accounts and managed using the details
in vendor masters. The master record would have to control how business
transactions are recorded and processed by the system.
Vendor master should also provide all the necessary details like type of vendor,
address and contact details, procurement currency, payment terms, etc.
AS-IS
There is no unique number assigned to a vendor;
A list of vendors, required by the organizations quality Policy is maintained.
TO-BE
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Every vendor will be identified by a unique vendor code. In a company, there can be
more than one purchase organization. A vendor code defined in the company need to
be extended to the required purchase organization.
Vendor is domestic type . Vendor’s address, maintained in vendor master.
The vendor code will be a numeric code. This code will not be the same as is used by
the organization in the current scenario, which is generally vendors name.
The master will be maintained centrally i.e. same vendor code across various
company codes. This vendor code will be extended to other companies and
purchasing organizations if required. So any other purchase organization or company
will not have a different vendor code for the same vendor.
VENDOR GROUPS
To create a master record, an account group has to be specified. The account group
cannot be changed after the master record has been created.
Account groups determine:
In case of EMAMI, the Vendor Account Groups are as follows:
Account group Description Number range
KRLV Local Vendors Internal numeric
KRFV Foreign Vendors Internal numeric
KROT One-time vendors External alphanumeric
PARTNER FUNCTIONS
Business Partner "vendor" can assume different roles in its dealings with the
company. Accordingly, in a procurement transaction, the “vendor” is first the ordering
address, then the supplier of goods, then the invoicing party, and finally the payee.
For this reason, several partner roles (partner functions) can be assigned to the
vendor.
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DESCRIPTION OF IMPROVEMENTS
Better control on various functions for example a vendor can be blocked for
procurement if required while other activities will still be in place.
Instantaneous availability of data for all the functional groups
Security of the master data is improved.Uniform codes ensures better planning
PURCHASE INFO RECORDS
The purchasing info record should contain information on a specific material and a
vendor supplying the material.
The info records contain the following:
Data such as prices and conditions that can be stored for the relevant purchasing
organization or plant.
Tolerance limits for over deliveries and under deliveries
The planned delivery time (lead time required by the vendor to deliver the material)
Vendor evaluation data
An indicator showing whether the vendor counts as the regular vendor for the
material
The vendor sub-range to which the material belongs.
The availability period during which the vendor can supply the material
AS-IS
The organization does not maintain the historical data for the vendor and material
price combination. Prices are solely adopted in the purchasing documents as per priornegotiations with the vendor.
TO-BE
The info records will be created automatically as the purchase transactions run. The
info record requires two organization levels: Plant and Purchase Organization.
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NUMBER RANGE
Info record Proposed Number Range
For stock material 1100000000 to 1199999999For Consignment 1200000000 to 1299999999
For Subcontract 1300000000 to 1399999999
DESCRIPTION OF IMPROVEMENTS
Better control on various functions.
Instantaneous availability of data for all the functional groups
Security of the master data is improved
In the info record the details like payment terms, delivery terms, conditions for
pricing like discount, surcharges etc can be stored which will be taken automatically
into the purchase order from purchasing info record.
SOURCE LIST
The source list is used in the administration of sources of supply.
It specifies the allowed (and disallowed) sources of a material for a certain plant
within a predefined period. Each source is defined by means of a source list record.
AS-IS
The company maintains a source list detailing the list of items a vendor provides as
per their QMS (Quality Management System) documents.
However, there is no periods defined for the source list.
TO-BE
A source list will be defined for each material and vendors shall be either allowed,
disallowed or fixed for supplying.
The following functions will be allowed
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Allow defining a source of supply as "fixed".
Such sources count as preferred sources over a certain period of time.
(For instance, the fixed vendor for material X is XX. for the first quarter and YY for the
second quarter of the year.)
Allow defining a source of supply as "blocked".
(For instance, the contract F may not be used for a certain period of time.)
As an aid in selecting the preferred source during the source determination process.
To block the external procurement of a material.
(For example, material L may not be ordered from 01.7.11 to 31.12.11)
PROCURMENT CYCLE
The procurement process at EMAMI starts with requisition from any
department/division in the form of a material indent. Indent would have the details of
materials required, required quantity and required delivery date. This indent would be
sent to the purchasing department, after getting the required approval.
The purchase department based on the material would send RFQ to the vendors. After
receiving the quotations, they will be compared based on commercial and technical
terms. Then the best amongst them would be selected for the purchase order. A
purchase order is then raised based on the quotation and sent to the vendor. Upon
delivery, the goods are receipted by the concerned department and based on the
material type; the item is consumed or taken to inventory. The vendor then sends the
invoice and then the invoice is compared against the goods receipt document.
For some materials, the organization maintains contracts for materials (with or
without delivery date mentioned). For executing the goods delivery, the procurement
department sends the vendor a Release order, which contains the amount of goods to
be delivered and the delivery period. The organization also has a contract with
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predefined scheduling arrangement, where the dates of delivery and quantity of
material to be delivered will be mentioned in the contract.
In case the production lines are exhausted, subcontracting of mayonnaise processes
takes place, and the material is delivered to the Plant. In special cases (Like in case
the production capacity is to the maximum), the company procures the material and
delivers directly to the customer (Third party sales).
Preservatives are purchased in consignment, i.e. the items are stored at storage
location and invoice is generated as per the consumption of the stock.
For procurement of services, purchase order is raised and details of the
service/services are defined along with the payment terms. Upon completion of the
service, a completion of services sheet is filled.
REQUIRED BUSINESS PROCESS FLOW DIAGRAM FOR EMAMI
REQUIREMENTS/EXPECTATIONS FROM THE PROCUREMENT
Planning for raw materials
Planning to place the requisition to cover if any requirement exists
Approval process for Purchase Requisition
Creation of RFQ and sending it to vendors
Maintaining quotations and price comparison
Creation of purchase orders or contract in the system
Different Number ranges for Domestic, Direct purchases and Services
Approval process for Purchase orders
The discounts and taxes (if applicable) to be captured in the purchase order
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Printing of Purchase Documents
Asset Purchase
Goods Receipt
Contracts and scheduling arrangement functionality
PURCHASE REQUISITIONS
Purchasing process starts with the generation of purchase requisition (PR). PR is
created manually in a user department or from the location where the material is
required. Purchase Requisition should be raised if there is insufficient stock of material
in stores, or if there is either a planned or an emergency requirement of any material
or any services. The concerned authority must duly approve the purchase requisition.
AS-IS
At EMAMI purchase request is created manually as well as through MRP, whenever a
material requirement arises.
TO-BE
Purchase process in SAP is initiated through purchase requisition functionality. A
purchase requisition is a request or instruction to Purchasing to procure a certain
quantity of a material or a service so that it is available at a certain point in time.
PURCHASE REQUISITION DOCUMENTS
Purchase requisitions at EMAMIL will be of following types characterized by the
document type:
Document
Type
Description Proposed Number Range
NB Standard Purchase Requisition 4500000 - 4599999
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ITEM NO. IN PURCHASE REQUISITION
Item No. in PR is the serial number of the item. There would be a difference of 10between two item numbers.
PURCHASE REQUISITION RELEASE PROCEDURE
It is an internal document that is not used outside the enterprise and is subject to a
release (clearance or approval) procedure.
This component is used to set up approval procedures for purchase requisitions.
Under such a procedure, if a purchase requisition fulfills certain conditions (e.g. the
total order value exceeds Rs.10, 000), it has to be approved by a person with the
requisite authority (the head of the department, for instance) before it can be
processed further. This process of approving (clearing, or giving the "green light" to)
a proposed item of expenditure is replicated in the SAP System by the "release
procedure".
Following are the steps to maintain Release Procedure for purchase requisition based
on business requirement.
1. To raise purchase requisition by Buyer g
2. Get approval from concern authority in Release Hierarchy
DESCRIPTION OF IMPROVEMENTS
Following are the benefits & improvements with respect to changes in the existing
processes:
Visibility in the process is possible
Source suggestion and source determination
Approved vendors only will be able to supply
Better tracking of requisition
Proper and efficient tracking of service requisitions and rented item requisition.
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RFQ
A request for quotation (RFQ) is an invitation extended by a purchasing organization
to a vendor to submit a quotation (bid) for the supply of materials or performance of
services.
QUOTATION
A quotation is an offer by a vendor to a purchasing organization regarding the supply
of materials or performance of services subject to specified conditions.
In Purchasing, the RFQ and the quotation form a single document. Prices and
conditions quoted by vendors will be entered in the original RFQ. In case an RFQ has
been issued to several vendors, the system will determine the most favorable
quotation submitted through quotation comparison functionality.
RFQ TYPE
There would be only two types of RFQ in EMAMI that would be:
AN (RFQ and Quotations)
NUMBER RANGE
The number range for RFQ would be:
Document
Category
Doc Type Description Number Range
A AN RFQ and Quotation 6000000-69999999
IMPROVEMENTS
Tracking of quotations
Tracking of linkage between PR and RFQ through collective number.
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PURCHASE ORDER
The purchase order should contain all the procurement and material / services related
information required by vendor. It should provide the quantity to be purchased,
delivery date and other contractual stipulations. Release order for material or work
order for services covered under contract are required for information regarding
delivery of the same. It is a legal document and should be verified and approved by
respective department heads.
AS-IS
EMAMI uses different type of purchase orders.
Standard purchase order – Used for standard domestic material purchase
Service order/Work order -Used for service purchase
Release order/Call out order-Used as call out for material or services contracted
Stock transfer order-Used for material transfer across the plants
Every PO is subjected to a predefined set of approvals based on certain defined
criteria.
TO-BE
The system will adopt information from the requisition and the quotation to help the
user to create a purchase order. As with purchase requisitions, Purchase orders can
be generated manually or automatically. Contracts (in the SAP System, types of
longer-term purchase agreement) are also supported. The purchase order will cover
all the price heads that are applicable to the purchasing.
The purchase order can be used for a variety of procurement purposes. User can
procure materials for direct consumption or for stock. Delivery of the total quantity of
material (or performance of the total volume of services) specified in a purchase order
item can be spread over a certain period in a delivery schedule. This schedule would
be recorded in the PO indicating the individual quantities with their corresponding
planned delivery dates.
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The system will adopt information from the requisition and the quotation to help the
user to create a purchase order. As with purchase requisitions, Purchase orders can
be generated manually or automatically. Contracts (in the SAP System, types of
longer-term purchase agreement) are also supported. The purchase order will cover
all the price heads that are applicable to the purchasing.
Purchase order can be generated in different ways.
When Vendor is known at PO generation time .This procedure will be used in case
when vendor is known only prior to PO Creation in the system and not during creation
of PR.
Creation of POs from assigned requisitions .This procedure will be used for creatingPO with reference to purchase requisitions already assigned to a vendor at the time of
latter’s creation.
The various types of PO for EMAMI would be:
NB (Standard)
UB (Stock Transfer)
Purchase Order Type Number Range
Standard NB 7000000-79999999
Stock Transfer UB 8000000-89999999
PURCHASE ORDER RELEASE PROCEDURE
It is an internal document that is not used outside the enterprise and is subject to a
release (clearance or approval) procedure.
This component is used to set up approval procedures for purchase order. Under such
a procedure, if a purchase order fulfills certain conditions (e.g. the total order value
exceeds Rs.10, 000), it has to be approved by a person with the requisite authority
(the head of the department, for instance) before it can be processed further. This
process of approving (clearing, or giving the "green light" to) a proposed item of
expenditure is replicated in the SAP System by the "release procedure".
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DESCRIPTION OF IMPROVEMENTS
Better tracking of PO processing.
Tracking of reference of PO with PR and contract.
OUTLINE AGREEMENT
An Outline Agreement like a contract should be used if the material is required
continuously throughout a certain predefined period at a certain fixed and agreed
price or when there exists a requirement of a long-term service. Whenever there is a
requirement of the material/ service, this document should be referred to.
There are two types of Outline Agreements
Contracts
Scheduling Agreements
CONTRACT
. The contract should avoid repeated initiation of the procurement process if the
material is required continuously throughout a certain predefined period at a certain
fixed and agreed price or when there exists a requirement of a long term service
AS-IS
A legal document in the form of a contract is maintained and release orders are raised
against the same. The value of the order and order already processed is not
maintained.
TO-BE
It is a type of outline agreement or long term buying arrangement. It is a binding
commitment to procure a certain material or service from vendor over a certainperiod of time.
Document
Category
Document
Type
Description Proposed Number Range
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KWK Value contract
460000 - 469999
K MK Quantity contract 470000 - 479999
RELEASE STRATEGIES
Like purchase requisition, purchase order, contract is also subjected to release
strategies. If there is a business process requirement that the respective authority
should duly approve the contract, then it must pass through electronic signature or
approval. Also since it is an outline agreement, it should be approved.
Along with several approvals, tender committee, comprising of personnel form
different department approves contract.
DESCRIPTION OF IMPROVEMENTS
Visibility in the process is possible
Default source assignment for contracted material
Better tracking of PR and release order for particular contract
SCHEDULING AGREEMENT
The scheduling agreement should be raised if the requirement for procurement of
material is on a long duration basis. The delivery schedule should be given to vendor
in advance in order to ensure compliance to the delivery dates. This should be used
only when there is no requirement of raising a PO to same vendor and the quantity
and schedule is known.
AS-IS
The company has a scheduling agreement for dyes and delivery dates are provided to
the customer
TO-BE
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In outline purchase agreement materials are procured on predetermined dates within
a certain time period and with particular terms and conditions. Delivery of the total
quantity of material specified in a scheduling agreement item is spread over a certain
period as per a delivery schedule that indicates the individual quantities with their
corresponding planned delivery dates. The scheduling agreement has following
features:
The following procurement types exist:
Standard
Document
Type
Description Proposed Number Range
LP Manual3500000000 to 3599999999
LPA Auto4500000000 to 4599999999
DESCRIPTION OF IMPROVEMENTS
Visibility in the process is possible
Default source assignment for contracted material
Better tracking of gas nominations, confirmations and quantity received.
SERVICES PROCUREMENT
Procurement of external services follows the same cycle as procurement of materials,
with some changes at document levels.
The service entry sheet should be used to ensure that the service(s) received are
accepted by the concern authorities. The service entry sheet should be duly approved
by the respective department head in order to create the liability in SR / IR clearing
account.
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SPECIAL ORGANIZATIONAL CONSIDERATIONS
A service comprises of a number of sub services. Sub services again can be broken to
activities and task levels. For example, AMC is a service, which is consolidation of
various service phases and various activities to be performed either stage wise or
parallel. Preliminary (single activity or task) level service needs to be defined as a
service and needs to be maintained into service master. Service entry sheet for every
preliminary activity under major service is created and maintained.
While making the service entry sheet, a liability to pay the vendor is created in SR/IR
clearing account. If any service is procured with the material e.g. transportation, and
cost is to be included in material cost, this would not be covered under servicesmanagement.
Service entry sheet is review and closed for predefined invoicing period.
Service entry sheet is maintained at site and is to be certified by relevant authority.
Service entry sheet must undergo release strategy.
AS-IS
The purchase order for material is the same as the purchase order for the service.
TO BE
MM External Services Management is an application component within the Materials
Management (MM) module. It supports the complete cycle of bid invitation, order
placement phase, and acceptance of services, as well as the invoice verification
process.
Service Entry Sheet is made with reference to the Purchase Order and the percentage
of the services performed.
NUMBER RANGE
The number range proposed for EMAMI is 1000000000 to 1999999999.
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RELEASE STRATEGIES
Like other purchasing documents Service Entry sheet is also subjected to release
strategies.
The responsible authority should duly approve the service entry sheet since, after the
acceptance, it creates the liability in SR/ IR clearing account for invoice verification.
The goods from the supplier are received at the storage area and the information is
given to the quality department along with the test certificate. Then the inspection of
material takes place as per the sampling plan. If the material inspected is ok it will be
kept in respective storage area and if the material is not ok, it is either rejected or
sent back to supplier. In Special cases, it will be kept for rework, if rework is possible
at the company premises. These charges will be incurred from supplier.
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The Goods Receipts Process should ensure that the quantity of the materials is as per
the desired specifications as in the Purchase Order or Contract Release order and it
should ensure that the required materials, components and spares are delivered to
the concerned user in time. The GR process should be reflected in inventory and
accounts. In EMAMI, goods receipt will be carried out against a purchase order
document, or stock transfer document. However, in some exceptional cases like
emergency purchase etc., goods receipt can be done without reference of any of
these documents. In the case of goods receipt with/without reference of PO/STO
following requirements should be fulfilled:
Goods to be received with/without PO
Goods receipt against a delivery (stock transfer with delivery)
Physical verification of goods before entering into the system.
Materials are also received based on reservations created by the buyer.
Need to capture delivery details (LR no, delivery note, expiry date quantity in delivery
note, etc)
Credit GR/IR account and debit inventory account
Over/Under delivery tolerance shall be complied with.
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Goods movement between intra-company
Stock Types: SAP provides the functionality of segregation of various stocks on the
basis of its usage. These stock types are managed at plant level. Following stock
types are available:
Stock Type Description
Total Valuated Stock Sum of all valuated stock of a material. It
consists of all the stock company owns.
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Document Concept: According to the document principle, a document must be
generated and stored in the system for every transaction/event that causes a change
Unrestricted Use Stock Company's own stock that is physically located
in the warehouse, valuated, and not subject to
any kind of usage restrictions
GR Blocked Stock Goods Receipt stock which is pending for
Physical Inspection
Blocked stock Company’s own stock that is not to be used.
(Rejected materials are also kept here)
Restricted Use Stock Valuated stock of a material managed in
batches held by a company (and belonging to
that company), usage of which is subject to
certain restrictions. This category of stock is
only used when batch status management is
active.
Stock in Transfer Quantity that was already withdrawn from stock
at the issuing location (plant, storage location)
during a two-step stock transfer but that has
not yet arrived at the receiving location (plant,
storage location). Stock in transfer is managed
in the valuated stock of the receiving location,
but it does not yet count as unrestricted-use
stock. It can also not be inventoried
Stock in transit Stock in transfer that is created for a stock
transfer through an STO and for Transfer
posting in two steps
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in stock. When posting a goods movement in the SAP system, material document and
accounting documents are created which are explained below.
Material Document: In the Inventory Management system, when a goods
movement is posted, a material document is generated that serves as proof of the
movement and as a source of information for any applications that follow.
Accounting Document: If the movement is relevant for Financial Accounting (that
is, if it leads to an update of the G/L accounts), an accounting document is created
parallel to the material document.
Movement Types: When a goods movement is entered in the system, a movement
type must be entered to differentiate between the various goods movements. A
movement type is a three-digit identification key for a goods movement. The followingtable contains examples of movement types
Goods MovementTransaction
code
Movement Type
Goods Receipt for Purchase Order into Unrestricted use
Stock
MIGO 101
Goods receipt for Purchase Order into GR Blocked Stock MIGO 103
Release from GR Blocked Stock MIGO 105
Return to vendor from unrestricted stock MB1C 122
Return to vendor from blocked Stock MB1C 124
The reversal movement types are for reversing the above goods movement. These
movement types are numbered as +1 for the movement to be reversed. For example
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reversal of 101 is 102. The system automatically determines the reversal movement
type. The movement type has important control functions in Inventory Management.
For example, the movement type plays an important role in
Updating of quantity fields.
Updating of stock and consumption accounts.
Determining which fields are displayed during entry of a document in the system.
GOODS RECIEPT
Goods receipt process in SAP is used to receive the material ordered in the PO or
Contract release order. This process enables the plant / process to be run efficiently.
The GR can be done with reference to PO/RO or without PO. The only difference is
that the system creates a PO in background.
The goods receipt is planned by the purchasing component in the form of purchase
order scheduled due dates. The purchase order data get copied into the GR document
according to the delivery schedule of the material. Quantity can be decreased or
increased based on actual supply but within the tolerance limit set in the material
master. Other information can also be captured such as LR number, Delivery note
quantity, Vendor Batch No., Manufacturing date; Expiry date, name of manufacturer;
Header text & GR slip number. Goods receipt can also be made without a purchase
order using movement type 505. Then after physical inspection the goods will be
transfer posted to unrestricted use stock using movement type 343. The goods
receipt with respect to a purchase order will be made into Blocked stock first and then
physically verified, and if found ok then only it will be released to unrestricted use
stock.
TYPE OF GR / MATERIAL DOCUMENT
Whenever there is a transaction in inventory management, the system creates a
document called material document .The GR type proposed for EMAMI is:
WE (Goods receipts for purchase orders)
WA (Other Goods Receipts and Transfer Postings)
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NUMBER RANGE
The Proposed Number range for GR is 5000000000 to 5999999999 for one year.
Document
Category
Description Number Range
WE Goods receipts for purchase
orders
5000000000 to
5999999999
WAGoods issues, transfer
postings, other goods receipts
6000000000 to
6999999999
ACCOUNT MOVEMENT
When GR is posted the following entries are passed in system:
Stock Account Debited
GR/IR clearing account Credited
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be
on the basis of quantity as well as value.
Tracking of various Goods Receipts is easy.
Total visibility of stock across the organization. This will include the stock of materials,
plant & storage location wise.
Materials in the blocked cannot be used, thus keeping a check on usage of materials.
Materials will be received within the tolerance limit, thus over & under deliveries can
be allowed but with in limits. This will give flexibility as well as control.
Multiple Goods receipts can be made against a purchase order.
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In EMAMI, the materials which are stored in storage location after the Quality
Inspection will be issued to the production order for the accomplishment of
production. Also the material will be issued to material indent raised by the different
departments and to the transfer orders where the material will be transferred from
one plant to another plant.
REQUIREMENTS/EXPECTATIONS
The Goods Issue process should be used in case of material requirement by any
department, Project or Plant Maintenance activity. The goods issue should be done in
such a way that there is optimum use of the material required and the inventory level
is within the prescribed range.
Goods issue (to cost centre, to project, to Plant Maintenance Order, Stock Transport
Order)
Goods issue with or without reservation.
Interplant stock transfer.
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Movement Types
When a goods movement is entered in the system, a movement type must be entered
to differentiate between the various goods movements. A movement type is a three-
digit identification key for a goods movement. The following table contains examples
of movement types
Goods Movement Transaction
Codes
Movement
Type
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Goods Movement Transaction
Codes
Movement
Type
Goods issue for Consumption to a Cost Centre fromUnrestricted Use Stock
MB1A 201
Goods issue for Consumption to a Cost Centre from
Consignment Stock
MB1A 201K
Goods issue for Consumption to a Plant Maintenance
Order from Unrestricted Use Stock
MB1A 261
Goods issue for Consumption to a Plant Maintenance
Order from Consignment Stock
MB1A 261K
The reversal movement types are for reversing the above goods movement. These
movement types are numbered as +1 for the movement to be reversed. For example
reversal of 201 is 202. The system automatically determines the reversal movement
type. The movement type has important control functions in Inventory Management.
For example, the movement type plays an important role in
Updating of quantity fields.
Updating of stock and consumption accounts.
Determining which fields are displayed during entry of a document in the system.
GOODS ISSUE
Goods issue refers to withdrawal of material by a department for use, and leads to a
reduction in warehouse stock. Proposed goods issues for EMAMI are:
(WA) Withdrawal of material for consumption.
(WI) Inventory Adjustment Postings
(WL) Goods Movements for Delivery Documents (SD)
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(WZ) Batch Status Changes
NUMBER RANGES
Document
Category
Description Number Range
WA Goods issues, transfer postings,
other goods receipts
6000000000 to 6999999999
WI Inventory Adjustment Postings
WLGoods Movements for Delivery
Documents (SD)
WZ Batch Status Changes
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be
on the basis of quantity as well as value.
Tracking of various Goods issues is easy.
Total visibility of stock across the organization. This will include the stock of materials,
plant & storage location wise.
IM (GOODS RETURNS TO VENDOR)
REQUIREMENTS/EXPECTATIONS
To ensure that material that has a discrepancy in terms of quantity or quality is
returned to the vendor.
GENERAL EXPLANATIONS
The quantity as mentioned in the purchase order/s is used to determine acceptable
quantity. If any discrepancy is found the material is returned and the cost etc. is
reimbursed to the vendor. The excess or shortage supply report is prepared and
material is sent to QC (if it is subject to QC) or sent to vendor, if QC rejects it.
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SPECIAL ORGANIZATIONAL CONSIDERATIONS
It will be mandatory to return the goods to the vendor if the material specification is
not met within the set tolerance limits of quality. This return of goods will be made
with reference to the document against which the material was receipt to have better
tracking of materials movements.
SOLUTION IN SAP
The movement types mentioned in following table describes the Goods Returns to
vendor process. These Movement types are the reversals of Goods receipt
transactions from vendors (with or without PO)
Goods Movement Movement Type
Goods Return to vendor (GR with PO) 122
GOODS RETURNED TO VENDOR
In SAP system, the goods are returned with reference to material document against
which it was received. The goods can be rejected and returned from inspection in
Blocked Stock; material can also be returned from unrestricted use stock. The reason
for return is to be given in the document of return; any complaints or notifications can
also be given to the vendor.
It is the reversal of the process of goods receiving so all information is same as for
GR.
NUMBER RANGES
Document
Category
Description Number Range
WA Goods issues, transfer postings, other goods
receipts
6000000000 to
6999999999
WI Inventory Adjustment Postings
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WL Goods Movements for Delivery Documents
(SD)
WZBatch Status Changes
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be
on the basis of quantity as well as value.
Tracking of various Goods movement is easy.
Track of returns to vendors is easy.
Materials in the blocked cannot be used, thus keeping a check on usage of materials.
IM (Transfer Posting / Stock Transfer)
REQUIREMENTS/EXPECTATIONS
It may be required to transfer material from one plant or storage location to another
plant / location. Especially in the case of EMAMI transfer of stock from storage
location to another storage location within a plant is very frequent. This transaction isto be used for material to be provided to the receiving location. In some special cases
the stock may be transferred from one plant to another plant. This is to be treated as
a stock transport activity for which a Stock transport Order will be used.
GENERAL EXPLANATIONS
EMAMI has a storage location in the each plant and the material is transferred from
one location to another as per the requirement. This material will be transferred from
the issuing location on request of the receiving location.
Transfer posting will be of the following types:
Goods Transfer Plant to Plant – Two Step Procedure
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Goods can be transferred from one plant to another with a delivery against a stock
transport order. A stock transport order is required for this kind of Stock transfer.
EXPLANATIONS OF FUNCTIONS AND EVENTS
Events: The events in the Stock Transfer/Transfer Posting process are
Receipt of Material Load Out form for Transfer Posting
Receipt of approval for stock transfer against a STO.
Physical checking of material transferred
Functions: The functions of Stock Transfer/Transfer Posting process are
Creation/Changing/Displaying Material transfers records
Collection of Stock Transfer/Transfer Posting data to be entered into the system.
Creating/Changing of Stock Transfer/Transfer Posting document to reflect the
required movement of goods into blocked stock
CHANGES TO EXISTING ORGANIZATION PROCESSES
The current process of Goods Transfers in EMAMI would be replaced by the standard
Stock Transfer/Transfer Posting process of SAP.
In case of inter plant transfers the loss in transit has to be scrapped out through a
different transaction
DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions can be maintained at any given point of time, this will be
on the basis of quantity as well as value.
Tracking of various Goods movement is easy.
Track of returns to vendors is easy.
Materials in the blocked cannot be used, thus keeping a check on usage of materials
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SOLUTION IN SAP
STOCK TRANSFER (PLANT TO PLANT)
A stock transfer from plant to plant not only leads to a change in stock quantity in
both plants; if both plants are assigned to different valuation areas, an accounting
document is also created.
This type of stock transfer can only be carried out from unrestricted-use stock of the
issuing plant to unrestricted-use stock of the receiving plant. It will be a two-step
procedure
In the first step the stock will be removed from issuing storage location with reference
to a Stock Transfer Order. A material document will be created for quantity postings
along with an accounting document for financial postings in this case. The stock
quantity will be reduced in the issuing storage location of the issuing plant. The stock
will be shown in transit at receiving storage location of receiving plant, and not in the
unrestricted use stock of the receiving plant
In the second step the goods will be received into the receiving storage location with
reference to the Stock transport Order. In this case only a material document will be
created thus increasing the stock in unrestricted stock at receiving storage location of the receiving plant and will not be shown as stock in transit any more. In this step
there will be no accounting document created as it has already been created in the
first step.
TRANSFER POSTING (STORAGE LOCATION TO STORAGE LOCATION)
The materials transfer postings from storage location to storage location in a plant will
not lead to creation of an accounting document because the valuation of the material
is same in both the location under the plant. The transfer postings can be made in the
two following ways:
Transfer Posting from Storage location to Storage Location in single step:
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Material will be posted from one storage location to another storage location in a
single step using movement type 311. There will be a material document created
showing the respective movement of the goods.
Transfer Posting from Storage Location to Storage Location in two steps:
A stock transfer from storage location to storage location in the same plant simply
causes an update of the stock quantities in both storage locations. The stock value
remains unchanged, and the event is not relevant for accounting. A stock transfer
from storage location to storage location is possible for all stock types. The process
for this done in two steps
Removal of stock from issuing storage location: The stock will be removed from theissuing storage location using movement type 313. A material document will be
created showing the material movement. The stock quantity will be reduced in the
issuing storage location and will be shown as stock in transfer at the receiving storage
location.
Placement of Stock in receiving storage location: The stock will be received into the
receiving storage location with reference to the material document created at the time
of removal of stock from issuing storage location using movement type 315. A
material document created and the stock will be updated in the unrestricted use stock
of the receiving storage location.
ONE STEP AND TWO STEP STOCK TRANSFER
Both stock transfers and transfer postings consist of a "goods issue" from an issuing
point and a "goods receipt" at a receiving point. Stock transfer from storage location
to storage location or from plant to plant either in one step or in two steps can be
posted.
The advantage of the one-step procedure is that there is a single transaction in the
system. The two-step procedure, on the other hand, allows monitoring the stocks in
transit. After the goods issue is posted at the issuing point, the stock appears "in
stock transfer" at the receiving point and is managed as such in the system.
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The two-step procedure is also required if users have authorizations only for their own
plants.
NUMBER RANGES
Document
Category
Description Number Range
WA Goods issues, transfer
postings, other goods receipts
6000000000 to
6999999999
WI Inventory Adjustment Postings
WL Goods Movements for Delivery
Documents (SD)
PHYSICAL INVENTORY VERIFICATION
AS-IS SITUATION
Preparation of excel sheet with all thematerial list consisting of system stock.
The material movement is allowed to and
fro of stores but not updates booked qty
Physical count of materials, lodging theentries in separate sheet.
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REQUIREMENTS/EXPECTATIONS
Every industry periodically wants to check what is the stocks balance in the books and
physical stocks lying in their stores. And once they know the actual stocks, will adjust
the book stocks accordingly. It helps:
To back up the balance sheet stock figures.
To minimize pilferage and fraudulent practices.
TO-BE STRUCTURE
Post the differences and calculate thevalue manually or in excel sheet.
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SOLUTION IN SAP
PHYSICAL INVENTORY PROCEDURES
The physical inventory procedures are as follows:
Periodic Inventory
In a periodic inventory, all stocks of the company are physically counted on the
balance sheet key date. In this case, all material items must be counted. During
counting, the entire warehouse must be blocked for material movements.
Continuous Inventory
In the continuous inventory procedure, stocks are counted continuously during theentire fiscal year. In this case, it is important to ensure that all material is physically
counted at least once during the year.
Cycle Counting
If there is difference between book stocks and
physical ststock
PHYSICALINVENTORYDOCUMENT
COUNT
Post
DifferenceUpdates stocksautomatically
Updates Accounts
Automatically
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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.
Inventory Sampling
In 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
In the R/3 System, physical inventory can be carried out for a company’s own stock.
Furthermore, the stock can be divided into stock types. In the standard system, a
physical inventory can be carried out for the following stock types:
Unrestricted-use stock in the warehouse
Quality inspection stock
Blocked stock
Physical Inventory is carried out in SAP in three steps
Create physical inventory document
Inventory count
Post the difference.
The plant and storage location in which the count is to take place
When the count is to take place
Which materials are to be counted
For material handled in batches: which batches are to be counted
In the case of split valuation: which sub-stocks are to be counted
Which stock types are to be counted
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BLOCKING MATERIALS FOR POSTING
Due to the delay between a material movement and the posting of that movement,
there is a short-term discrepancy between actual warehouse stock and book
inventory. To avoid such a discrepancy during physical inventory, it is recommended
to block the materials for posting during the physical inventory. A posting block can
be set in two ways:
Block the relevant materials and generate the physical inventory document. This is
recommended to create the physical inventory document immediately before the
count.
Block the relevant materials later by changing the posted physical inventory
document. This is recommended if the physical inventory document immediately is
not created before the count.
The posting block is automatically cancelled after posting the counting results for the
physical inventory document.
Print and distribute the physical inventory document. Print out the physical inventory
document for the physical inventory count and pass it on to the people responsible for
doing the counting.
INVENTORY COUNT
The stocks are counted individually for the materials in a physical inventory
document.
The count results are written on the printout of the physical inventory document.
The printout is then directed back to the person responsible, so that he or she can
enter the count into the system and analyze it.
ENTERING THE COUNT RESULTS IN THE SYSTEM
After the count has been taken, enter the results of the count into the system.
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POSTING INVENTORY DIFFERENCES
If the physical inventory is different from the book inventory, the book inventory
balances must be corrected by posting the differences. This step ends the physical
inventory process.
When physical inventory difference is posted, the system creates a material document
that records the adjusted stock balances and an accounting document that contains
the necessary account activities.
When inventory difference is posted, the material master record is changed; total
stock is automatically adjusted to the counted quantity. From the accounting point of
view, this corresponds to a goods receipt or goods issue, meaning that when the
inventory difference is posted, the stock account is debited or credited.
If the counted quantity is smaller than the book inventory balance, the stock account
is credited with the value, “inventory difference x price”. The offsetting entry is made
in the "Expense from physical inventory" account.
If the counted quantity is greater than the book inventory balance, the stock account
is debited with the value of the “inventory difference x price”. The offsetting entry is
made to the "Income from physical inventory" account.
Since the amount posted is calculated on the basis of the current standard or moving
average price, posting inventory differences does not lead to a price change.
If there is any discrepancy in the count (After posting of differences), Recounting
can be carried out.
INITIATING A RECOUNT
It is possible to initiate recounts for individual items on a physical inventory
document. This is recommended if an error was made during counting. When a
recount is initiated, a new physical inventory document is created.
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SESSIONS METHOD
Session’s method is to be used for creating physical inventory documents of many
materials automatically with selection parameters like material numbers range,
material type etc. The following steps are involved for executing this method.
Create a session for the objects in question.
The session is "processed" meaning the system carries out the transaction for every
object.
One advantage of this procedure is that it saves monotonous entry time. Another is
that a session can be processed at various times, allowing company’s system
administrator to better utilize the capacities of the computer
NUMBER RANGES
Document
Category
Description Number Range
IB Physical inventory
documents
100000 to 199999
200000 to 299999
300000 to 399999
400000 to 499999
IDPhysical inventory
documents for counts and
differences
without reference
IN Physical inventory
documents for recounts
IZ Physical inventory
documents for count without
reference
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DESCRIPTION OF IMPROVEMENTS
Accurate inventory positions
Financial implications captured regularly
ACCOUNT DETERMINATION
Account Determination should provide information about the accounts movement in
purchasing, inventory management, physical inventory and invoice verification. It
should therefore be enabled to capture the financial impact on any transaction,
including movement of that material. The different materials falling under the same
material type can either be posted to in one G/L account or different accounts as per
requirement.
GENERAL EXPLANATIONS
EMAMI Purchases various types of materials and services. The accounts movement is
different for services and materials. There are separate accounts for materials and
services. E.g. the GR/IR clearing account for materials has the description “GR/IR
Clearing Account“ and the ”SR/IR Clearing Account” is for services. Similarly there is a
provision for inventory related accounts. These accounts would be both general and
specific as per requirements.
EXPLANATIONS OF FUNCTIONS AND EVENTS
Events:
Automatic account determination is used by the system for posting the values to the
proper G/L accounts in many instances such as during creation of GRN / GI
documents, processing IV, etc.
Functions:
Automatic Account determination updates the proper G/L account to
reflect the current financial status.
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Solution in SAP
In SAP a valuation class is assigned to each material type. A material type may have
one or more valuation classes depending upon the requirement. The valuation class is
assigned to one or more G/L accounts as per the requirement. Various types of G/L
accounts are GR/IR clearing, inventory posting account etc.
Batch Management
It is mainly used to maintain the homogeneity of the material and to trace out the
faulty material for recalling the product of customer.
As-Is
Earlier EMAMI was using its own methodology to name batches.
To-Be
We are going to implement batch management in EMAMI for procurement of raw
materials.