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ERP SAP Material Management - SAP MM Tutorial -trickcode

ERP SAP Material Management ,What is ERP?,What is SAP? ,ERP/ SAP divided into two parts,BASIS,ABAP/ 4,HR (HUMAN RESOURCES),FI/CO,MM ,SD,PP,MM Cycle,Material management module,Purchasing organization,Purchasing group,Enterprise,Warehouse,How many layers are there in SAP?,SAP R/3 architecture,MIRO
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ERP SAP Material Management Theory

What is ERP?

Enterprise Resource Planning is an SAP product that contains several modules like MM, accounting, production management, BI, etc.

What is SAP? 

Systems Applications & Products in the data processing. It is founded in 1972 by five ex- IBM engineers. It is a German software product that allows business, tracks customers & integrated with them. It is especially known for its ERP & database.

ERP/ SAP divided into two parts: -

  • Technical
  • Functional

Under technical two groups are there: -

  • ABAP/ 4

Under functional five groups are there: -


What are the resources in any enterprise?

There is five M are as follows: -
  1. MAN (HR)
  2. MONEY (FI/CO)

The organizational structure of MM in SAP

  1. Client (who installed ERP/ SAP to organization or company)
  2. Company
  3. Company code
  4. Plants
  5. Store locations
  6. Purchasing organization
  7. Purchasing group

MM Cycle

  1. Demand (material demand)
  2. Request (material or request)
  3. RFQ (request for quotation)
  4. Source determination (vendor selection)
  5. Purchase order
  6. Purchase order monitoring (mail/phone)
  7. GRN (goods receipt note)
  8. Invoice verification
  9. Payment (FI/CO)

Material management module

The MM module ensures that the required product is available in sufficient quality at the right price.

Purchasing organization

It is an organization's condition of purchase with vendors for one or more plants. It is equally responsible for completely purchasing contracts.

Purchasing group

It is the key for a buyer or group of buyers responsible for certain purchasing activities.


It is a large establishment having different types of units. Each unit of an enterprise responsible for implementing a distinct business process such a production, sales, purchasing.


It is a part of the organization used to store finished products, semi-finished goods, scrap tools.

SAP Standard

Material type & description

  • ERSA- spare parts
  • HIBE- operating supplies
  • ROH-raw materials
  • VERP- packing materials
  • FERT- finished products
  • HALB- semi-finished product
  • HAWA- trading goods
  • PIPE- pipeline products

Implementation phases

  1. Business blueprint analysis
  2. As is analysis or earlier system analysis
  3. Gap analysis 
  4. Project preparation
  5. Final preparation
  6. Go live

Projects in SAP

  1. Implementation- 9 consultant
  2. Up-gradation
  3. Support- 6 consultant
  4. Post-implementation

Who is the 6 consultant in support?

  1. ABAP/4
  2. BASIS
  3. FI/CO
  4. MM
  5. PP
  6. SD

How many layers are there in SAP?

There are three layers in SAP R/3

  1.  Presentation
  2.  Application
  3.  Database

SAP R/3 architecture

  • R/1 (1972): -all the 3 layers are implemented in a single system they are communicated to the other module instantly.
  • R/2 (1980): -it is implemented on mainframe database DB/2, IMS & design like SAP clients can connect with SAP server access the data store in database keeping in mind SAP customers from different languages. 
  • R/3 (1992): -it is computable with the UNIX platform, windows platform where the user can make changes to a particular layer in the client sever without making changes in the entire system. According to the requirement, the information can be shared with another module.

Landscape server

  1.  Development
  2.  Quality; Testing
  3.  Production

Clint server

  • 291-sand box server (initial testing scenario)
  • 292-development (client data of minimum 15 days transactions)
  • 294-testing (developed scenario tested here)
  • 295-golden master service (quality testing)
  • 296-production server (client live data store & daily business transactions are done)


In the subcontracting process, we create subcontracting purchase orders to supply or issue subcomponents to the vendor in order to get the final product. The price maintained in the subcontracting purchase order is a service charge paid to the vendor.

Steps to perform subcontracting

  • Create subcontracting info record (optional)
  • Create subcontracting purchase order with item category L, there are two ways to supply sub-components to the vendor- manually maintain the subcomponents in the subcontracting purchase order though explode BOM; through BOM (bills of material)
  • Create a transfer posting with movement type 541 to issues the subcomponents to the vendor.
  • Good receipt
  • Invoice receipt


ME21N-enter item catg. L-material (end product), PO, quantity, delivery date, net price, plant- click on item details- tab material data- components, select explode BOM- click on components button- enter the subcomponents- go back & save
Consignment (NO concept of INVOICE)

In the consignment process, we will not create a purchasing document for the vendor, the vendor himself send the material to our plant through the material is available to our plant, the responsibility & ownership of the material is of the vendor. Liability only arises when the material withdrawal (consumption) is posted in the system from consignment stock.

Steps: -

  1.  Create consignment info record (MANDATORY)
  2.  Create a consignment purchase order with item category ‘K’ & maintain info record number
  3.  Create GR movement type ‘10K’
  4.  Create a GI movement type ‘201K’
  5. Consignment settlement T-Code MRKO


ME11-info record-purchasing org. data 1 views of info record enter the tax code & save it.

  • Create consignment PO ME21N (price option is grayed out with price zero)
  • Create GR movement type’10K’
  • Create GI T-Code MB1A & movement type ‘201K’ enter cost center vendor
  • Consignment settlement T-Code MRKO click activate consignment activate settle execute.
  • Display the document number i.e. invoice receipt T-Code FB03

Pipeline process (NO concept of INVOICE)

In pipeline handling your company does not need to order or store the material concerned. It is readily available to you as & when required via pipeline (e.g. Oil or water), or some other type of cable (e.g. Electricity). Consumption of the material is settled with the vendor on a regular basis.
Steps: - 
  • Create a material master record with material type PIPE 
  • Create pipeline info record
  • Create GI with movement type ‘201P’
  • Pipeline settlements T-Code MRKO

What is STO?

  • Stock Transfer Order
  • Stock transport Order

 In transit, quantity can be monitored.
  1. This order may be raised on the name of the transporter.
  2. The receiving plant may value such stock on billing price or the price on the order.
  3. The receiving plant adds the stock to its inventory (unrestricted use stock) only after the GR is done.
  4. The GR can be done against the order.
  5. Useful when the using plant does not have access to the receiving plant system.
  6. This is also more logical when the stock transfer is between different company codes.


  • Single-step- stock transfer order would be processed to one plant to a different plant or one store to a different store. This signifies by 645 movement type.
  • Two steps- STO in two steps where goods are issues from one plant & on the other side goods are received on the other plant. Two documents were generated sales order document issuing plant & purchase order document issuing receiving plant & the movement type is 643.
  • Without delivery- in STO where goods are issued from one plant & received goods by the other plants by cash payment without delivery. Two types of the document were made release document & received document.
  • With delivery via shipping- stock transfer through the same process from one plant who issue sales order (releasing document)& the other plant issued purchase order (received document) & goods transfer through the shipping (delivery document) from B to A.
  • With delivery with billing- from plant B stock transfer to plant A. plant B will create sales order (releasing document), stock transfer via shipping(shipping document), & creating a bill that is invoice & plant A will create a purchase order (received document).

Credit memo processing & returns processing

  1.  Credit memo process [sales document type G2] two scenario
  • Customer returns previously purchased products & requires a credit i.e. return process.
  • Under the customer is credited without returning any goods:

Like when the customer is overcharged for a product or services & is issued a credit for the difference.

How you can automatically at a hiding block that may be released by an authorized person prior to the credit being carried out. It is the creditor not the credits the customer’s account in document receivables.

It is possible to make it mandatory to enter order reasons on the credit note which explains when the credit was given.
The standard item category used by credit memos in GLN


SAP-SD-sales doc. - sales doc. Data-define sales doc. Type (VOV8)

  1. Debit memo processing [sales document type L2]

The debit process is used when a customer is undercharged for a material. A debit memo request is created & invoiced using standard billing procedure. There is no movement of materials.

You may set a mandatory indicator that the debit memo requests can only be created with reference to the invoice document the originated with the problem also, activate the document. How checkbox on copy control rules in order to retain the document to history.

It is possible to select to order reason on debit note & make this field mandatory in document type incompletion procedure.

The disputed amount usually arises from income pricing master data. So rather than debiting the customer for the disputed amount, it is recommended that you credit the customer for the disputed sales documents in full, then correct the pricing & created correct procedure can be followed for all disputed short-priced order standard items catg. By debits- L2N.

3. Return processing [sales document type RE]

Here return delivery is the mode. The return order can be created with reference to an invoice to ensure the traceability of the process. This is mandatory to ensure the setting on sales document type when creating return order type.

For the in computation procedure to be added is necessary.

You may wish to copy the pricing unchanged from the invoice back into the sales order. By using the save pricing values you can use a complete reversal of the invoice.

For that do not forget to activate the updated document. How checkbox on the copy control rules between billing (invoice) & sales document (return)

It is advisable to have a billing block assigned to the return order in the sales document header configuration to initiate the billing block has been inspected you can either scrap it or if the stock is sales ability, you can put it into unrestricted use stock. The stock is available for not sales orders.

It is advisable to indicate a shipping condition that is specifically used for returns this return delivery or goods receipts may be done by a specific shipping point.

This is useful when running the delivery due list you can select only to process the returns deliveries, as well as offer letter visibility of stock movements.

The standard item catg. Used by returns in REN.

After the creation & goods issue of the delivery the billing block is removed from the sales order & the invoice is created, with reference to the sales order.

This way you are able to create a credit for the return in sales order which in turn has the order quantity copied from proceeding invoice.

The credit memo then automatically reduces the customer’s account receivable balance.

SAP creates the billing documents from the return order rather than from the delivery so that the customer can receive the credit without waiting for the receipt of the goods to take place it, for example, it may take a while for the stock to be returned to the plant, but the customer wants the credits immediately.


SD & MM: -

When we create sales orders in SD all the details of line items are copied from MM (MRP & Availability check).

When we create outbound & inbound delivery, the shipping point determination takes place with the help of shipping condition, loading group, and delivery plant which is configured in MM


  • MRP
  • Availability
  • Transfer of requirements
  • Reduce stock

Procurement process under: -
  • Consumable material
  • Service procurement
  • Consignment
  • Stock transfer of material

Consumable Material: -

This refers to the acquisition of goods or services from a company at the lowest possible cost. It begins from the requirement of material & ends when the payment is made to suppliers known as the p2p cycle (purchase to pay).

It is the process to sustain & manage raw material required to manufacture final goods.

Service Procurement: -

Process of processing external services, such as repairing, painting from suppliers.
Example: -

The company hires en external vendor to repair the software system for that you need to create & send a service purchase order & vendor in the case no goods receipt is posted. In this case, a service entry sheet is manufactured for the record.


Two documents created:-
  • Service entry sheet
  • Invoice verification document

Create a service master record (AC03): -

It shows service description & unit of measure.

 Defining or maintaining services condition at the service level (ML45)
 Defining or maintaining service at service & plant level (ML39)

At services, vendor, plant level (ML33)

How the implementation of the services procurement process: -

Create a purchase order (ME21N)
Create, maintain, accept of services entry sheet (ML81N)
Verify services.

Create a purchase order: -

  1. K & V as account assignment categories. D as item categories.
  2. Enter the details of an item in item details.
  3. Save.
  4. The purchase order number is generated.
Create, maintain, and accept of services entry sheet (ML81N): -
  • Click the other purchase order push button
  • Enter the purchase order number as generated
  • Click continue
Click the create select the cost center as account assignment categories & enter the service procurement process.

Then screen shows, such as basic data, accept data, values which can be selected depending upon the requirement.

When all services are recorded in the service entry sheet, you need to accept the sheet.

The traffic light the (the number is shown) creates an entry sheet screen indicates the status of the services entry sheet.

Following colors: -

  • Red – service entry sheet number not accepted.
  • Yellow- accepted but not saved.
  • Green – accepted & saved
Then post the invoice for the direct procurement process.

Procurement of stock material: -

1) When materials are needed, the requisition is sent to the purchasing department

2) The materials are ordered and later received into the warehouse

3) Stock values update.

4) The invoice is matched against what was received and later paid by the financial.

Special forms of inventory management: -

Inventory management is the process to manage the stock on a quantity basis, value basis, with proper planning, proper entry, prof. of goods movements.

There are four method of physical inventory: -

  • Periodic inventory
  • Inventory sampling
  • Cycle counting
  • Third party

Periodic inventory management: - stocks are physically counted on balance sheet key date.

Inventory sampling: - in inventory sampling stocks are counted continually 4 physical year material at least one count.

Cycle counting: - in cycle counting method physical inventory counted at regular intervals within a physical year.

Third part: - subcontracting stock; consignment stock; pipeline stock

Sources of supply: -

There are two type of source of supply (outline agreement)

  • Contract agreement
  • Scheduling agreement

Contract agreement: - it means the agreement done between the company & vendor for the supply of raw materials.

Scheduling agreement: - it means the agreement done between company & they will receive the raw materials (time, days, date, etc)

Goods movements: -

1) External

2) Internal

Ø External: - goods received from external procurement. Goods issued from the sales orders.

Ø Internal: - goods received from internal procurement goods transfer, transfer posting, internal procurement process, goods received from production.

Credit memo: -

Select in the transaction- credit memo

Now same as invoice process

Tax, cash discount & invoice in foreign currency: -

When you mark calculate tax in the invoice which increases the amount.

For foreign currency in invoice take (EURO)

Document packing (MIR7): -

Same as invoice making process only in place simulate, go to invoice document,

Ø Save as park document

Ø Again go to MIR7 do all things as previous & click on save as complete.

Payment block: -

Go to MIRO

Same as invoice process only to click in payment as blocked for payment

Blocking reasons as effects of variance in the invoice: -

Theoretical part: -

Ø Material issues

Ø Credit memo

Ø Invoice difference

When matter clear

Then release invoice (MRBR):-

Company code

Invoice document number- blocked number

Click on manual payment block in blocking procedure.

Click on execute

Select line item

Release invoice (click on green color flag) [F9]

Then save it.

Invoice reduction as a reaction to variances: -


Show the difference by putting the difference value in tax field msg appears as differences in credit & debit then correct it & save it.

Invoice for purchase orders with account assignment & entry of delivery costs: -

In MIRO- in tab PO reference

Three options are available: -
  • Goods/ services item- material cost
  • Planned delivery costs- transportation cost
  • Goods/ services items + planned delivery cost
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