MM-FI Integration

SAP MM-FI
Integration
step By
Step Notes

Ashraf
Corporate & Online
Trainer
Material Management Concept:

Page 1 of 6 Ashraf.fico@gmail.com
 MM-FI Integration
Material Management is one of the important module in SAP. These module supports the Procurement and Inventory
Function occurring in day to day business operations.
This module contains many aspects such as
Purchasing,
Good Receiving,
Material Storage,
Consumption based Planning and
Inventory

MM Module is tightly integrated with other modules of SAP R/3 like Financial Accounting, Controlling, Sales and
Distribution, Quality Management, Plant Maintenance, Production Planning and Warehouse Management

It supports all phases of Material Mgmt like Material Planning and Control, Purchasing, Good Receiving, Inventory
Mgmt and Invoice verification

MM Organization Structure

Company Code

Plant 1 Plant 2 Plant 3 Plant 4

Storage Location

Purchase Groups

Page 2 of 6 Ashraf.fico@gmail.com
 MM-FI Integration
Purchasing Organization:
It is an MM Org unit, used to categories inventory transactions according to its nature.
Multiple Plants can be assigned to one Purchasing Org.

Plant:
It is a physical location where the Production Activity and Procurement transactions are performed. In SAP Plant can
be Production Unit, Sales Office or a Corporate Office.

Note: All Inventory transactions must be Posted at Plant Level

Automatic Posting of Inventory Valuation Transactions in Fin. Accounting depends on Assignment of Company Code
to Plant
This Assignment can be 1 : 1 or 1 : N ratio (Company Code Vs Plant)

Note: One Plant Cannot be Assigned to Multiple Company Codes

Storage Location:
The Place where the Stock are kept. These Locations are maintained under Plant

Importance Parameters of MM – FI Integration are

Company Code and Plant Assignment
Valuation Level
Moment Type
Material Master
Transaction Keys or Event Keys
Valuation Sting
Valuation Grouping Code or Valuation Modifier
Account Modifier or General Modifier
Valuation Class
Posting Keys

Sub Module of MM
Material Planning
Purchasing
Inventory Mgmt
Vendor Valuation
Invoice Verification
Statutory Requirement

Procurement To Payment ( P To P Cycle )

All Inventory Managed transaction are posted from MM Module and due to Integration settings, the valuation will hit
Financial Accounting in the form of Journal Entries

Purchase Requisition
Purchase Order
Goods Received → Inventory A/c Dr To GR/IR Clearing A/c
Invoice Receipt → GR/IR Clearing A/c Dr To Vendor A/c
Outgoing Payment → Vendor A/c Dr To Cash / Bank A/c

Procurement of Goods or Assets or Services (Procurement Process P 2 P Cycle )

Goods Receipt Accounting Entry Invoice Verification Accounting Entry

Inventory Account Dr GR/IR Clearing A/c Dr
To GR/IR Clearing A/c To Vendor A/c

Vendor Payment Accounting Entry Material consumption against cost centers

production order Accounting Entry
Vendor Account Dr Consumption A/c Dr
Page 3 of 6 Ashraf.fico@gmail.com
 MM-FI Integration
To Cash/Bank A/c Inventory A/c

Finished Goods Received From Production

Dept. Accounting Entry
Inventory Finished Goods A/c Dr
To Change in Stock A/c or
To Increase/Decrease A/c or
To Factory Production Output A/c

Delivering the Finished Goods To Customer

Movement Type
Goods movement in Logistic is tracked through movement type.

This must be provided against each inventory transaction

List of Movement Type

101 - Good Received with Reference to Purchase Order
102 -Reversal of Movement Type 101 (Cancellation of Good Received)
122 -Return Delivery of the Supplier
201 -Goods Issued to Cost Center for Consumption
241 -Goods Issued to the Assets
261 -Goods Issued Against Production Order
309 -Transfer of Posting from Material to Material
311 -Transfer Posting from Storage Location to another Location
545 -Receipt of Product from Sub-Contractor
554 -Scrapping of Goods
561 -Initial Entry of Stock Balances (Opening Stock)
601 -Goods Issued for Delivery
651 -Good Return from Customer
701 -Inventory Differences Unrestricted Stock

Note: Based on Movement Type system will control the transaction keys. Inventory GL Accounts are maintained
against transaction keys
Material Types:
It is used to classify the materials based on material nature and attributes
The Material Master must be created with ref. to material type
Each Material Type Control
No. Range of Material Master (Internal/External)
Field Status of Material Master, Views, and Screens Settings
It Controls Controlling and Accounting information

List of Material Types:

ROH -Raw Material
FERT -Finished Goods
VERP -Packing Material
ERSA -Spare Parts
DIEN -Services
HALB -Semi Finished Goods
PIPE -Pipe Line Products
HAWA -Traded Goods

Note: Against Material Type, we must maintain quantity update and value update (Material Type Attribute) for each
Plant and Valuation Area.
On setting of this indicator system will updates all quantity movements and value of material in a Material Master

Page 4 of 6 Ashraf.fico@gmail.com
 MM-FI Integration
Material Master:
It is Important Logistic Master Data and consists of all the imp or Key Properties relevant to other modules.
It is maintained with multiple views relevant to MM, SD, PP, PM, WH, FI and CO
It indicates Material Master is central component used for Integration between all others module
Plant Or Valuation Area:
Plant is Logistic Org unit which is used to track or maintain all inventory transactions
All the stocks or Material Master must be maintained at Plant Level
Each Plant must be assigned to a Company Code

Valuation Area:
Material can be valuated at Plant Level or at Company Code Level
The Level at which the Materials are valuated into Financial Accounting is called as Valuation Area or Valuation Level

Valuation Level at Company Code:

The Material Price must be equal across all the Plants of a Company Code

Valuation At Plant Level

Material Prices are maintained at Plant Level and Price can be differentiated

It is advisable to maintain material valuation at Plant Level

Price Indicators:
The Price indicators of Material Master Place a vital/imp Role in Material Valuation
Below are Price Indicator available for Valuate inventory

S-Standard Price
V-Moving Average Price

Standard Price:
The nature of material prices which are Fixed or not Fluctuated frequently are managed with Price indicator ‘S’ and
also the in-house manufacturing materials for which the Price is under control also managed with Standard Price

The standard price is maintained in material master. All the material/goods movements must be evaluated with the
standard price maintained in material master
Any price difference will be posted to Price Difference Account
Price Standard
Description Indicator Price Actual Price Quantity Value Difference
Material XYZ X 10 5 50
Material XYZ X 12 5 60 10

The Production Department produced 10 more quantity at 12/- Actual Cost.

The material is valuated at Rs.10/- and difference of Rs.2/- will be posted to Price difference account or Production
Variance Account

Page 5 of 6 Ashraf.fico@gmail.com
 MM-FI Integration
List of Transaction Keys:-

Moving Average Price:

This indicator is maintained for materials for the Prices which are much fluctuated and not under the control of
Organization.
Ex: - External Procured Materials, Services, Traded goods.
System will always calculate a New Price at each Goods Movement

Material Valuation is done at New Price

Transaction Keys:
The inventory GL A/c are mapped to Transactions Keys with the Combination of Chart of Acc (COA), Valuation
Grouping Code, Valuation Modifier or Account Modifier and Valuation Class

Based on the Valuation Sting of the movement type system will automatically hit the respective transaction keys.

Availability Check KP

Select MRP4 Tab

Selection Method
Individual/Coll 1 – Individual Reqmnt

Select Accounting One Tab

Valuation class T100 - Raw Material
Price control V (Moving Avg Price) Price Unit : 1
Moving price 5000 Standard Price :

Select Accounting Two Tab

Select Costing One Tab

Basic Unit of Measure PC
Select X X With Qty Structure X Material Margin
Profit Center 3000
Costing Lot Size 1
Select Costing Two Tab
Save

Msg:- Material 60000010 Create

Create More Materials by Same Process
Msg:- Material 60000011 Create

Page 6 of 6 Ashraf.fico@gmail.com