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Camso 2018
SAP MM
The Materials Management (MM) module is the business process
area that handles daily activities of a business such as Procurement,
Inventory Management, Materials Requirement Planning, Master data
(Material and Vendor), Material Valuation, Vendor Evaluation, Invoice
Verification and so on. Most business that operate in the
manufacturing sector find this SAP module very useful as it helps in
optimizing business processes.
Why Companies Need SAP MM and What This Module Does?
One major importance of MM is in its ability for accurate stock taking which 4
Camso 2015
Why Companies Need SAP MM and What This Module Does?
With the use of this module, most companies are able to keep accurate 5
Camso 2015
SAP MM Organizational Structure
Most companies have a framework upon which their business operations are conducted. This
framework is usually referred to as organization structure or in SAP parlance enterprise structure. 6
The enterprise structure is composed of a number of organizational units which relates to one
another. To establish this relationship between the levels it is important that we assign them in such
a way that they lie in the same hierarchy.
Camso 2018
SAP MM Organizational Structure
Client
Within the SAP system we consider a client as self-contained in terms of data, and it is the highest 7
hierarchical level in the SAP system. All specifications as it relates to data entered at this level is applied to
all company codes and all the other organizational units. In a particular R/3 system, we can have single or
multiple company codes depending on the business requirements as it pertains to the company operations.
Hence, a client key is usually used as a unique identifier when access to the respective clients are needed.
Company Code
Following the client is the company code where replication of independent accounts can be performed. It is
the smallest unit in the organization where this takes place. This represent an independent unit of Balance
Sheet, and Profit and Loss Accounting, e.g. as seen in a company within a corporate group. As stated
earlier, several company codes can exist in a single client in order to thus keep separate sets of financial
books.
Camso 2018
SAP MM Organizational Structure
Plant
A plant is regarded the logistics unit within the organizational hierarchy handles the procurement of 8
materials, services, production, materials valuation, materials planning, and inventory. In some other
business scenarios, a plant can represent a Manufacturing Facility, a Distribution Centre, Sales
Regions, Head offices (e.g., in banking sector) or a maintenance office (e.g., in maintenance planning
plants) within a company.
Storage Location
Differentiation of material stocks within a plant takes place at the storage location level. Here also, we
monitor goods movements in and out of inventory and carry out physical inventory count to ascertain
inventory levels at given periods.
Camso 2018
SAP MM Organizational Structure
Purchasing Organization
The purchasing organization unit is responsible for procurement of materials or services on behalf of9
the company. It also negotiates conditions of purchase with vendors. A purchasing organisation can
procure for several company codes (centralized purchasing), specific company code (company
specific), and specific plants (plant specific) depending on the configurations.
Purchasing Group
This organizational unit is responsible for the everyday procurement activities that go on in an
organization. Usually, they comprise a group of buyers, depending on the size of the company, and
are responsible for procurement of goods and services.
Camso 2018
Overview of The Main Business Processes in SAP MM
Procurement
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Procurement begins from raising requisitions from requesting departments or process orders from production or work orders
from maintenance or sales orders from sales unit, or as a result of materials reservation from the material planner. Next is for
the procurement team to send out quotation request to source vendors for the procurement of these items of material or
services. Vendor selection then takes place and purchase orders are generated capturing all the associated cost elements as
agreed.
Invoice verification
This process most times looks at what value of items of stock of service was received and processes payments based on this
information. In SAP MM this is referred to as the 3-way match. Hence, payments are based on goods receipt quantities not
Purchase order quantities.
Camso 2018
SAP MM Integration with Other SAP Modules
SAP MM is strongly integrated with other modules. As the backbone of the logistics it is integrated with
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Production Planning (especially in Material Requirements Planning), Sales and Distribution, Warehouse
Management, Transportation Management, Shipping, Environment, Health and safety, Quality
Management (for stock materials that most pass through quality assurance procedure), Plant
Maintenance (in the areas of bills of materials used for materials spares), Project Systems (WBS
elements), and in newer SAP solution areas like Supply Chain Management (SCM), Supplier
Relationship Management (SRM).
SAP MM is also strongly integrated with Financials module as every postings occurring in inventory has
direct impacts on general ledger accounts which report to balance sheet and profit and loss statements.
Material valuation also integrates with Finance. It also integrates with the Controlling module in areas of
budget controls for release for funds to procurement. Other areas of integration points are with Human
Resource Management module in the use of organization level in defining release approval for purchase
orders based on positions IDs of the responsible staff personnel
Camso 2018
Master Data in SAP MM
Material Master Data 12
Here, based on the purpose for use of the material we can define the material type views, if it is non-
stock, its valuation class, price control and valuation type if it is split evaluated.
Camso 2018