Sap MM Business Blue Print - Sample

SAP MM BLUE PRINT_SAMPLE G.V.
SHIVAKKUMAR
ZZZ MODEL GROUP
Version 1.0
MM MODULE G.V.SHIVAKKUMAR
VENKATESANSIVAKUMAR@YAHOO.CO.IN

Project: ZZZ Model Company
Business Blueprint
Materials Management
Version 1.0
Please use my link to download the SAP articles:-
http://gvshivakkumar.blogspot.in/?view=flipcard
http://www.sapfunctional.com/WM/Configuration/Index.htm
http://www.sapfunctional.com/WM/WMQ1.htm
http://www.sapfunctional.com/MM/MMQ1.htm
http://www.mediafire.com/view/hdfm84rmkq7h495/SAP_INTEGRATION_BETWEEN_MM+SD+PP.docx
http://www.mediafire.com/view/29trlg8qtn8z0nj/SAP_FI-MM_and_FI-SD_Integration.docx
http://www.mediafire.com/view/cxajoijh3j5s6es/Materials_Management_Step_by_Step_Configuration.docx

http://www.mediafire.com/view/svz777fpr8w0o2e/Systematic_Approach_to_Run_SAP_Implementation-Support-
Maintenance_Project.docx
http://www.mediafire.com/view/3cq2e2etbq0uty5/SD_Blue_Print_Document_Sample.docx
http://www.mediafire.com/view/lcf45t12n4899nx/SAP_Workflow_for_MM_Purchase_order.docx

G.V.SHIVAKKUMAR
Venkatesansivakumar@yahoo.co.in

SAP MM BLUE PRINT_SAMPLE G.V.SHIVAKKUMAR
ZZZ MODEL GROUP
Version 1.0

Document Information

Document Owner: G.V.Shivakkumar

Document Distribution

Name Organization Distribution Date

Document History
All revisions made to this document are listed here in chronological order.

Version
No.
Brief
Description
Page
No
Author Reviewed by Approved
by
Released
by
Release
date
1.0
Initial Version

G.V.Shivakkumar

25.06.2014

ZZZ MODEL GROUP
Version 1.0

Contents
1. INTRODUCTION .............................................................................................................. 1
1.1 OBJECTIVE OF THIS REPORT ............................................................................................... 1
1.2 ORGANIZATION OVERVIEW ............................................................................................... 1
1.2.1 ABOUT ZZZ CHEMICALS ................................................................................................. 1
1.2.2 ABOUT ZZZ POLYMERS .................................................................................................. 2
1.3 MATERIALS MANAGEMENT AT ZZZ .................................................................................... 3
2. ORGANIZATIONAL ELEMENTS IN MM ........................................................................... 6
2.1.1 PLANTS ....................................................................................................................... 6
2.1.2 PURCHASE ORGANIZATIONS............................................................................................ 7
2.1.3 PURCHASING GROUPS ................................................................................................... 8
2.1.4 STORAGE LOCATIONS .................................................................................................... 9
2.1.5 WAREHOUSE ............................................................................................................. 11
3. PROCESS ARCHITECTURE ............................................................................................. 19
3.1 MATERIAL MASTER ....................................................................................................... 19
3.1.1 THE MATERIAL TYPES IDENTIFIED FOR ZZZ ....................................................................... 19
3.1.2 ASSUMPTIONS ........................................................................................................... 20
3.1.3 UNIT OF MEASUREMENT.............................................................................................. 20
3.2 VENDOR MASTER ......................................................................................................... 21
3.2.1 ASSUMPTIONS ........................................................................................................... 21
3.3 BATCH MANAGEMENT ................................................................................................... 21
3.4 EXCISE MASTERS ........................................................................................................... 22
4. PROCUREMENT............................................................................................................. 23
4.1 PURCHASE REQUISITION ................................................................................................. 24
4.1.1 PROCESS FLOW .......................................................................................................... 24
4.2 REQUEST FOR QUOTATION (RFQ) ................................................................................... 25
4.2.1 PROCESS FLOW .......................................................................................................... 25
4.3 VENDOR QUOTATION AND BID EVALUATION ...................................................................... 26
4.3.1 PROCESS FLOW .......................................................................................................... 26
4.3.2 GAPS / ISSUES IDENTIFIED AND SOLUTIONS ...................................................................... 28
4.3.3 FORMS AND REPORTS REQUIRED .................................................................................... 28
4.4 PURCHASE ORDER STOCK ITEMS ....................................................................................... 28
ZZZ MODEL GROUP
Version 1.0

4.4.1 PROCESS FLOW .......................................................................................................... 28
4.4.2 EXCEPTIONS AND VARIATIONS ....................................................................................... 31
4.4.4 CONDITIONS IN PURCHASE ORDER ................................................................................. 31
4.4.5 DELIVERY COSTS IN PURCHASE ORDERS .......................................................................... 32
4.4.6 EXCISE AND SALES TAX RELATED DETAILS ......................................................................... 32
4.4.7 ACCOUNT ASSIGNED PO (CONSUMPTION ORDERS) .......................................................... 33
4.4.8 ASSET PURCHASE ....................................................................................................... 33
4.4.9 RELEASE PROCEDURE FOR PURCHASE ORDER ................................................................... 33
4.4.10 FORMS AND REPORTS REQUIRED .................................................................................. 34
4.5 HIGH SEA SALES ........................................................................................................... 34
5. INVENTORY MANAGEMENT ........................................................................................ 36
5.1 MATERIAL RECEIPT ........................................................................................................ 36
5.1.1 GOODS RECEIPT PROCEDURE ........................................................................................ 37
5.1.2 EXCISE DETAILS TO BE CAPTURED AT GOODS RECEIPT FROM VENDOR ..................................... 47
5.1.3 GAPS / ISSUES IDENTIFIED AND SOLUTIONS ...................................................................... 48
5.1.5 INTERFACES ............................................................................................................... 48
5.2 MATERIAL ISSUES (CONSUMPTION) ................................................................................. 48
5.2.1 TRANSFER POSTINGS ................................................................................................... 49
5.2.2 PLANT TO PLANT TRANSFERS ......................................................................................... 50
5.2.3 TRANSFER OF MATERIAL FROM MANUFACTURING PLANT TO STOCKING PLANT OR C&F (WITH
EXCISE INVOICE) ..................................................................................................................... 50
5.2.4 MATERIAL TRANSFER FROM STORAGE LOCATION TO STORAGE LOCATION .............................. 51
5.2.5 MATERIAL TO MATERIAL TRANSFER ............................................................................... 51
5.2.6 STOCK TO STOCK......................................................................................................... 51
5.2.7 BIN TO BIN TRANSFER .................................................................................................. 52
5.3 MATERIAL RETURNS ...................................................................................................... 52
5.3.1 MATERIAL RETURN TO VENDOR .................................................................................... 52
5.3.2 MATERIAL RETURN TO STORES ...................................................................................... 53
5.4 MATERIAL RESERVATION ................................................................................................ 53
5.5 STOCK TRANSFER ORDER ................................................................................................ 55
5.5.1 CHARACTERISTICS OF A STOCK TRANSFER ORDER .............................................................. 55
5.5.2 PROCESSING OF STOCK TRANSFERS BETWEEN THE TWO PLANTS .......................................... 56
5.6 VENDOR EVALUATION ................................................................................................... 57
5.6.1 ASSUMPTION ............................................................................................................. 62
5.7 PHYSICAL INVENTORY .................................................................................................... 62
ZZZ MODEL GROUP
Version 1.0

5.7.1 PHYSICAL INVENTORY IN WAREHOUSE MANAGEMENT ....................................................... 63
5.7.3 AUTHORISATION REQUIREMENTS ................................................................................... 65
5.8 LOGISTICS INVOICE VERIFICATION / BILL PASSING ............................................................... 65
5.8.1 PROCESS FLOW .......................................................................................................... 66
6. EXCISE JVS .................................................................................................................... 68
7. SCRAP IDENTIFICATION ................................................................................................ 70
7.1.1 PROCESS FLOW .......................................................................................................... 70
8. INFORMATION SYSTEM IN MM ................................................................................... 71
9. LIST OF ABAP DEVELOPMENTS .................................................................................... 72
9.1 FORMS & REPORTS ....................................................................................................... 72
9.2 DATA MIGRATION STRATEGY .......................................................................................... 72
9.2.1 MASTER DATA ........................................................................................................... 72
9.2.2 BALANCES ................................................................................................................. 72

ZZZ GROUP - 1 -PAGE 1 OF 78AAG
SAP MM BUSINESS BLUE PRINT_SAMPLE
MM MODULE BLUE PRINT_SAMPLE

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1.Introduction
1.1 Objective of this report
The report initially gives an overview of the Materials management Module purview along with
CIN and Warehouse Management. This would essentially help in defining the boundaries of the
module and also in identifying the activities to be performed within Materials management
Module in SAP. Subsequently, the report discusses in detail, the proposed coverage of SAP at
ZZZ, in terms of organisational entities and business processes. Each business process has been
described with all the variations. The authorisation requirements would be identified and
configured during the configuration phase
1.2 Organization Overview
ZZZ Group SAP implementation spans the following two group companies:
ZZZ Chemicals Limited
ZZZ Polymers Limited
1.2.1 About ZZZ Chemicals
ZZZ Chemicals Ltd. is in the business of manufacturing and marketing of petroleum products
It serves the following market segments:
The industrial market consisting of industrial users of oils who buy the products in bulk
on regular basis. These include private sector as well as public sector companies.
The retail market consisting of small users of oils to whom products are sold through
multiple levels of demand chain (C&F Agents, Dealers and Retailers).
Export market
The product categories of ZZZ are:
Specialty oils, with a focus on Industrial customers, consisting of:
Transformer oils
Light Liquid Paraffin
Heavy Liquid Paraffin
White Oils
Speciality Oils

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Lube Oils with a focus on retail users
ZZZ has about 350 stock keeping units, consisting of Product, Grade, Brand and Pack size.
ZZZs business units are:
Head office in Mumbai
Two factories Thane and Silvassa
One packing unit at Mahape
Five branch offices
About 40 C&F Agents spread all over India
1.2.2 About ZZZ Polymers
ZZZ Polymers Ltd. is situated in Coimbatore and in engaged in the business of manufacturing and
selling petroleum products and polymers catering to the requirement of telecom industry,
pharmaceutical & cosmetic industry as well as manufacturing emulsifiable waxes & emulsions
for textile industry. Presently about 80% of the turnover is for Export products viz.: CFC,
Transformer Oils, White Oil and Petroleum Jelly. The domestic market demand involves
emulsifiable wax BW 300 and small quantities of CFC, Petroleum Jelly and Optical Fibre Jelly. SPL
employs about 75 people.


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1.3 Materials Management at Savita
The Material Management Module has multiple processes broadly divided into Procurement,
Good Receipt and Inventory Management across businesses in ZZZ Group.

Purchasing is a component of Materials Management (MM). The Materials Management (MM)
module is fully integrated with the other modules of the SAP System. It supports all the phases
of materials management: materials planning and control, purchasing, goods receiving,
inventory management, and invoice verification

The purchasing module deals with the:
External procurement of materials and services
Determination of possible sources of supply for a requirement identified by the
materials planning and control system or arising directly within a user department
Purchasing communicates with other modules in the SAP System to ensure a constant
flow of information. For example, it works side by side with the following modules like
Controlling (CO), Financial Accounting (FI), Sales and Distribution (SD), Quality Control
(QM).

Inventory Management component of Material management deals with the following tasks:
Management of material stocks on a quantity and value basis
Planning, Entry, and Documentation of all Goods Movements
Carrying out the Physical Inventory.

Logistics Invoice Verification is a part of Materials Management (MM). It is situated at the end of
the logistics supply chain that includes Purchasing, Inventory Management, and Invoice
Verification. It is in Logistics Invoice Verification that incoming invoices are verified in terms of
their content, prices, and arithmetic. When the invoice is posted, the invoice data is saved in the
system. The system updates the data saved in the invoice documents in Materials Management
and Financial Accounting.

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SAP R/3 Materials Management
Material
Special stock
Batch
Vendor/one-time
customer
Purchasing
info record
Service
specifications
Texts
Mail
Communication
Classification
Conditions
BASIC DATA BASIC DATA
P
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n

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V
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i
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Purchase requisition
PURCHASING PURCHASING
MRP
Direct requisition
Release procedures
RFQ/Quotation
Material/service
Price comparisons
Price comparison list
Purchasing
Purchase orders
Outline agreements
Scheduling agreements
Goods receipt/issue
Transfer posting
Quantities and values
Physical inventory
Storage bins
Check and post
Price update
INVENTORY MANAGEMENT INVENTORY MANAGEMENT
INVOICE VERIFICATION INVOICE VERIFICATION
SD SD
PP PP
PM PM
QM QM
FI FI
AM AM
CO CO
WM WM
Third-party
order
Requirements
Service /
spare parts
Inspection lot
G/L accounts
Cash management
and forecast
Fixed assets
Cost center /
Budget
Ware house
management

SAP R/3 Materials
Management
Mater ials
Planning
Inv oic e Ver ifi ca tion
Financial a nd C os t
Accounti ng
Sales and
Distr ibut ion
Mas ter Da ta
Material
Batches
Vendors
G/L accounts
Storage bins
Goods Receipt Tr ansfer
Posting
Goods
Issue
Invoice
Receipt
Inve ntor y Ma na geme nt
Impor ts PO
Pur chasing
Pur chase
Or der
Materials Manage ment

Business Process Scope:
The Materials Management (MM) module will cover the following business processes:
Organization Structure (Related to Materials)
Consumption Based MRP Planning of material either based on Reorder Point or Forecast
based.
Purchase Requisition Processing Generation of Requisitions for materials and services based
on MRP, Real time (manual), sales order and projects.
RFQ/Quotation Processing Generation of Request for Quotation (RFQ), Quotation processing
and comparison.

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Purchase Order Processing Creating Purchase Orders (PO) for materials and services with
respect to PR, Quotation, Contracts, direct PO, Stock Transfer Order, Sub-Contracting, Releasing
the PO to vendors.
Vendor Evaluation Vendor Evaluation based on Quality and reliability parameters.
Inventory Management Managing material receipt, Issues and transfers in the plants, and
Physical Inventory.
Inventory Valuation Material Valuation based on moving average price and standard price
based on inventory transactions.
Invoice Verification Bill passing for the vendors for materials and services, Credit Note


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2.Organizational elements in MM
2.1.1 Plants
The Plant is an operating area within a company where there is stock movement. Each of the
manufacturing locations and C & F locations shall be identified as a Plant in SAP. For the
purposes of valuation of inventory at ZZZ Group, the Plant is defined as the Valuation Level
within SAP where materials will be valued.
The plant is embedded in the organizational structure as follows:
The Plant is assigned to a single Company code. A Company code can have several plants. As ZZZ
has two companies i.e. ZZZ Chemical and ZZZ Polymer each companies will have their own set of
Plants.
Several Storage Locations in which material stocks are managed can belong to a plant. A plant
can have one or more storage locations.
A Plant can be assigned to several combinations of Sales Organisation and Distribution Channel.
(will be mentioned normally-Details in the SD blue print)
A Plant can have several Shipping Points. A Shipping Point can be assigned to several Plants (will
be mentioned normally-Details in the SD blue print).
A plant has an Address, Language, and Country.
A plant has its own material master data. You can maintain data at plant level for the following
views on a material master record in particular: MRP, Purchasing, Storage, Work scheduling,
Production resources/tools, Forecasting, Quality management, Sales, Accounting and Costing.
The plant plays an important role in Material Valuation, Inventory Management, MRP,
Production, and Costing & Plant Maintenance.
The list of plants attached to ZZZ Chemicals Limited as under:
ZZZ Chemicals
Trichy Plant - 1100
Madras Plant - 1200
Salem Plant - 1300
Outside Storage - 1400
Delhi Branch - 1500
8 Windmills - 1701 1708

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43 C & F Locations - 1601 1643
Head Office - 1800

The list of plants attached to Savita Polymers Company is as under:
ZZZ
mohali Plant - 2100
SSSS Plant - 2200
Head Office - 2300
Outside Location - 2400

Dependencies
One additional logical plant of Head office has to be created as the procurement activities for
ZZZ chemical and ZZZ polymer is handled centrally from head office.
SSSS Plant 2200 attached to company ZZZ will be used only for managing initial assets and
inventory. Transactions for this plant will not be mapped.
The procurement of administrative and Service items at head office will have to be identified as
per the companies.
All the material stored in the outside locations will have to be identified as per the company
code and will be accounted in one Plant for each company code i.e. Outside Locations
For identification of stock at various Storage Locations and tanks within the storage locations
will done through ware house management.
As materials are stored at C&F and each C&F has its own valuation, the same will be created as
Plants.
2.1.2 Purchase Organizations
A Purchase Organization is an organizational unit within logistics in SAP R/3, which subdivides an
enterprise 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. Each purchasing organization has its own

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Vendor Master Data
Purchase Info Records
Conditions for Pricing
Purchasing Organisation for ZZZ Group: ZZZ group will have one Central Purchase Organisation
which will be responsible for procurement for ZZZ Chemical and ZZZ Polymers.
ZZZ Group will also have plant wise Decentralised Purchase Organisation to cater miscellaneous
procurement handled independently by each plant.
T001 - Central Purchase Org (handled by Head office)
C001 - Decentralised P org for Trichy
C002 - Decentralised P org for Mohali
C003 - Decentralised P org for Salem
C003 - Central P org for ZZZ
P001 - Decentralised P org for Mangalore

These purchasing organisations will cater to all the procurement activities required for the
plants.
For example all the plant specific raw materials/spares/tools etc. will be bought by the plant
procurement department using the respective purchasing organisation.
2.1.3 Purchasing Groups
The purchasing organisation is further subdivided into purchasing groups (buyer groups), which
are responsible for day-to-day buying activities. A purchasing group is an entity, which
communicates with the vendor.
The purchasing group is internally responsible for the procurement of a material or an external
service and as a rule the principal channel for a company's dealings with its vendors.
Purchasing groups for Savita Group
H01 - Imports Presently the person Responsible are Mr xxxxl and yyyyy
H02 - RM Domestic, Packing and Transport Presently the person responsible Mr cccc
H03 - Engineering & capital & consumables purchase Presently the person responsible Mr
ffffff
H04 For administrative purchases

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P01 Trichy Plant Presently the person responsible is Plant Head Trichy
P02 Salem Plant Presently the person responsible is Plant Head Salem
P03 Mangalore Plant Presently the person responsible is Plant Head Mangalore
P03 Madras Plant Presently the person responsible is Plant Head Madras
2.1.4 Storage Locations
A storage location is the place where stock is physically kept within a plant.
A storage location has the following attributes:
There shall one or more storage locations within a plant.
A storage location has its code and description.
It is possible to store material data specific to a storage location.
Stocks are managed only on a quantity basis and not on a value basis at storage location
level.
Physical inventories are carried out at storage location level.
Storage location are always created for a plant
Storage Locations for Savita Group are
Plant: Trichy 1100
CODE Description
1100 Tank Farm
L001 TG-3
L002 Hydrocarbon
L003 M TOP Plant.
L004 Behind New Godown
L005 New Tank Farm
L006 LLP Godown
L007 OIL-1 Tank Area
L008 Near Weigh BRIDGE.
L009 PM Speciality Open
L010 Scrap
L011 Rejected Speciality
L012 Rejected Lubes.
L013 Engineering Stores
L014 R & D
L015 TO Godown.
L016 Lube Plant
L017 Lube open

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CODE Description
L018 New warehouse I
L019 New warehouse 2

Plant: Mohali 1200
CODE Description
1200 Tank Farm
L101 Scrap
L102 Rejected
L103 Engineering Stores
L104 Trading Stores
L105 FG/PM Stores
L106 Returnable Stores.

Plant: Salem 1300
CODE Description
1300 Tank Farm
L201 Shed adjoining to unit II
L202 Area behind Unit I / II
L203 FG Drums storage BSR
L204 Unit No. 1
L205 Unit No. 2
L206 Rear end road
L207 New BSR -Road
L208 Area OPP .to Unit I & II
L209 Unit NO.2
L210 Unit NO. 1
L211 Engg. Stores
L212 Utility Block
L213 Scrap

Plant: Outside location 1400
CODE Description
1400 Tank Farm

Plant: Madras 2100
CODE Description
2100 Tank Farm

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L301 CFC PLANT
L302 CFC PLANT OPEN YARD
L303 CFC SHED NO.1
L304 CFC SHED NO.2
L305 MCW PLANT
L306 MCW PLANT OPEN YARD
L307 TBS SHED
L308 RAW MATERIAL WAREHOUSE
L309 RAW MATERIAL WAREHOUSE OPEN YARD
L310 PPD WAREHOUSE
L311 E.WAX PLANT
L312 OFC PLANT & POWDER ROOM
L313 PETRO.JELLY PLANT OPEN YARD
L314 PETRO.JELLY PLANT
L315 BFP
L316 BFP OPEN YARD
L317 D.G.ROOM
L318 ENGG.STORES
L319 ENGG.STORES OPEN YARD
Plant: Outside location 2400 (SPL)
CODE Description
2400 Tank Farm

Dependencies
Each plant will have minimum one storage location to monitor inventory related transaction
For ZZZ company
Delhi Plant, C & F Plants, Wind Mill Plants and HO will have one Storage location each
For ZZZ company
Salem Plant and HO will have one storage location
2.1.5 Warehouse
The Warehouse Management (WM) application provides flexible, automated support to assist
you in processing all goods movements and in maintaining current stock inventories in your
warehousing complex.
WM supports warehousing processes by making it possible for you to
Define and manage complex warehousing structures
Optimize material flow using advanced put away and picking techniques

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Process goods receipts, goods issues and stock transfers quickly and easily
For ZZZ Group Ware house structure is as follows
For Trichy Plant Storage Location Tanks

TRICHY
1100
TANK FARM
1100
TANK
110

Ex-Bonded
E01

Bonded
B01

Tank
B001 B067

Tanks
E001 E067

Plant Code

Storage
Location

Section

Bins

Storage Type


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For Mohali Plant Storage Location Tanks

Mohali
1200

Tank Farm
1200
Tank
120

Receiving
R01

Tanks
R101 R126

Plant Code

Storage
Location

Section

Bins

Storage Type


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For Salem Plant Storage Location Tanks

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Salem
1300

Tank Farm
1300
Tank
130

Ex-Bonded
E01

Bonded
B01

Tank
B201 B229

Tanks
E201 E229

Plant Code

Storage
Location

Section

Bins

Storage Type


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For Outside Plant Storage Location Tanks

Outside
1400

Tank Farm
1400
Andheri
141

Tank
B900 B999

Tanks
E900 E999

Plant Code

Storage
Location

Section

Bins

Storage Type

New
Mum
144

BPT
143

Out
Tank
145

Out
Tank
146

JNPT
142

Ex Bonded
E01

Bonded
B01


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For Madras Plant Storage Location Tanks

Assumptions
Madras
2100

Tank Farm
2100
Tank
210
Ex-Bonded
E01

Bonded
B01

Tank
B301 B350

Tanks
E301 E350

Plant Code

Storage
Location

Section

Bins

Storage Type


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1. In ZZZ Group Ware House Management will activated only for Tanks in the respective
plants.
2. All the tanks will be created as BIN.


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3.Process Architecture
3.1 Material Master
The material master contains information on all the materials that a company procures or
produces, stores, and sells. It is the company's central source for retrieving material-specific
data. This information is stored in individual material master records.
Material master is integrated with
Material Management
Production Planning
Sales and Distribution
Accounting and Controlling
Creation of material code is always with reference to the material type for which it is created
Material number generation is at the Level of Material Type.
Each material type will be identified with a different number range series.
Uniform material codification has to be maintained across all the plants of ZZZ
Material code has to be maintained on which CENVAT is allowed as per CIN
requirement.
3.1.1 The material types identified for ZZZ

Raw Materials
Stores and Spares
Packing Material
Semi-Finished goods (Intermediate Goods)
Finished goods
Scrap
Trading goods
Engineering for capital goods
Administration

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3.1.2 Assumptions
1. ZZZ will follow the external numbering for material codification system.
2. The numbering will be restricted to maximum 6 characters
3. Material Code will unique across all plants
4. Raw material e.g. Base oil will be batch managed
5. Raw Material, Stores and Spares, Packing Material and Trading Goods will have Moving
Average Price (MAP)
6. Semi Finished, Finished and Scraps goods will have Standard Price (SP)
7. If the same material is sourced from local and foreign vendors, it will have a separate
code and valuations
8. Bonded and Ex-bonded material will have a unique code and hence one valuation
9. Each material type will have a valuation class and a G/L A/c linked to it for inventory
postings
3.1.3 Unit of Measurement
Following Units of measurement can be maintained in material master.
Base Unit of Measurement
Sales Unit of measurement
Ordering Unit of measurement
Issue Unit of measurement
For any entry of UOM other than base unit of measurement, a conversion factor with respect to
the base UOM will have to be maintained. At The material transactions the appropriate
conversion will be carried out. For e.g. base UOM is KG however Issue UOM is L & the
Conversion rate is 1kg=2L then if 100kg of material is issued the stock will be reduced by
200L.The stock overview report can be seen in both UOMs.
SAP standard reports provide the information in the Base Unit of Measurement.
The relation between base unit of measure and alternative unit of measure has to be identified
properly and relationship will be unique for the material. The material cannot have multiple
values for an alternative unit of measure with respect to the base unit of measure.
For ZZZ

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Base oils the base unit of measurement will be Litres.
The base UOM will be unique for a material for all the plants.
3.2 Vendor Master
Vendor shall be created for the Purchasing Organisation and company code wherein its going to
be used. The various Account groups, which shall be used to create a vendor, are:
Domestic Vendors
Import Vendors
Service Vendors
Employees
FI vendors
For advanced licence tracking
3.2.1 Assumptions
1. Vendor numbering will be alpha-numeric linked to Account Groups and the number ranges
will be externally generated with separate no. range assigned to various account groups
2. If a vendor is supplying from multiple location, separate vendor codes shall be created for
each of the vendor location.
3. Dummy Vendors will be created for each of the Advance License. A separate reconciliation
account will be identified for these type of vendors created per advance license
4. The vendors are maintained at company code and purchasing organisation level and cannot
be identified by plant level.
3.3 Batch Management
Certain raw materials in stores be batch managed. For these materials, batch numbering shall be
externally assigned. Material having similar characteristics but slight difference in specifications
shall be managed with activation of batch management.
Batch will be at plant level, while transferring the material from one plant to another; same
batch number shall be identified at the receiving plant.
Batches will be identified manually during issue. There will be no batch for SFG. All FGs except
lubes will be batch managed.

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The batches Number will be captured at the time of GRN preparation which will be entered
manually. Batch number can be maintained as vendor wise, make wise, date wise etc. as per
requirement.
Savita will use vessel wise batch numbers for imports raw material
3.4 Excise Masters
Following India-specific (from statutory standpoint) masters need to be created in SAP
Chapter ID Descriptions
Material Chapter ID combination
Material Assessable values
Modvat determination
Vendor Excise details
Customer Excise details
Excise rates
Exceptional Excise rates
Additional Excise rates


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4.Procurement
In SAP the procurement process can be broadly defined as per the eight steps defined below. In
ZZZ the Material requirement planning (MRP) of raw material will be derived based on Bill of
Material of finished goods. The forecast for the finished goods will be indicated in the Sales and
operation planning (SOP). The requirement of the raw material will be net of the available stock,
open purchase order and open purchase requisition. The details of processes of MRP and SOP
will be covered in PP and SD blueprint

Purch. req.
Procurement Procurement
Determination of Req.
Payment processing
1 1
8 8
Vendor selection 3 3
Source determination
2 2
PO processing 4 4
Purch. ord.
10
20
30
Goods receipt 6 6
Invoice verification 7 7
Invoice
? ?
PO monitoring 5 5
Purchase
Order
10
20
30
Procurement Cycle Summary

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4.1 Purchase Requisition
A Purchase Requisition is an internal document, which is a request or instruction to Purchasing
Department to procure a certain quantity of a material or services so that it is available at a
certain point in time.
The following shall be the source of Purchase Requisition (PR):
MRP (Materials requirement planning including reorder /forecast)
Manual
Maintenance Order

4.1.1 Process Flow
From MRP:
For Raw materials, Packing materials and Stores and Spares the Purchase Requisition will be
automatically created through MRP run. Raw material and Packing material requirement will be
based on the BOM of FG and SFG. In case of Stores and Spares the material requirement will be
based on reorder point, which will be defined in the Material Masters.
Manual:

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The user can also create a Manual Requisition for specific requirement and will be created by
authorised personnel.
From Maintenance Order:
System will automatically generate the PR for the non stock able items in the order.
Document types for Purchase Requisitions NB- Purchase requisitions
4.2 Request for Quotation (RFQ)

4.2.1 Process Flow
Request for Quotations are the enquiries issued to the identified vendors for receiving the Price
quote of required materials.
RFQs will be issued to each of the approved vendors for a particular material. Based on the
numbers of vendors the same number of RFQs will be issued i.e. A unique RFQ will be issued to
each of the approved vendors for a particular material.
RFQ will be created with reference to the Purchase requisition if it exists as per the PR
procedure earlier defined e.g. PR created manually or through MRP. RFQs also will be created
without any reference if no PR exists.

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Each individual RFQ created will have Header and Item Information.
Header Information will capture vendor details based on the Vendor Master and
General Information in the form Text.
Item Information will capture the details of the material, the quantity required and
delivery dates.
In the RFQ the user will identify the following details
Purchasing Organisation
Purchase Group
Deadline for Submission of quotation
Material and Quantity
Plant for which the material is required
All the RFQ issued to different vendors for the procurement of the same material will be
identified with a same and unique collective number. The collective number will be identified by
the user as it will form a base for comparison of quotation from different vendors for the same
material
A tracking number also can be identified by the user for each of the RFQs for the his operating
convenience
There shall be RFQ document type: AN
4.3 Vendor Quotation and Bid evaluation
4.3.1 Process Flow
Quotations will be received from the vendors based on the RFQ sent to them. The Quotations
will have the various pricing conditions quoted by the vendor for the material specified in RFQ.
The quotation received will be entered in the system with reference to RFQ issued. The RFQ and
quotation will be identified with the same number.
The detail price break up will be identified in the quotation. For e.g. some of the details are
stated below.
Basic Rate
Discount

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Packing and Forwarding
Excise Duty
VAT
Freight (Inward and Outward)

Assumptions
The above price break-up will be the form pricing condition in the Price Schema which will be
attached in the Vendor master.
Quotation compare
The quotation compare will be based on the collective number identified in the RFQ. All the RFQ
identified with a unique collective number will be compared. The system will calculate the net
effective price after taking into consideration the secondary elements in the price i.e. Discount,
Freight, packing etc.
The system will consider the taxation during calculate the effective / net price. I.e. The net price
will be net of excise, but the sales tax will not be taken into account.
All quotation comparisons will be on the net landed price. If the user wants to refer the detail
pricing of each quotation, then on the same screen the user will have to click on the quotation
and the data will be furnished.
All the quotations also can be compared with reference to ideal quotation which will have a best
price.
The system will rank the compared quotation based on the landed price.
Based on the RFQ generated in the SAP, the vendor sends his quotation this is captured in the
RFQ made for the vendor in the SAP.
The details of the quote, i.e. the conditions (like Basic price, freight, discounts etc) are keyed
into the system. Quotations received from the various suppliers shall be entered into the system
with reference to RFQ generated in the system. Quotation comparison can be carried out using
various Quotation numbers or using the Collective number.
In SAP the RFQ & Quotations shall have the same number.

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The quotation shall be compared based on the pricing conditions entered in the system.
4.3.2 Gaps / Issues Identified and Solutions
The system does not compare the quotations based on payment terms, Inco terms and technical
aspects of the material.
4.3.3 Forms and reports required
Report on Quotation Compare will have to be developed.
4.4 Purchase order Stock items
A purchase order is a formal request to a vendor to supply certain goods or services under
certain conditions.
4.4.1 Process Flow
A purchase order is a formal request to a vendor to supply certain goods or services under
certain conditions.
The user will create Purchase Order can be created with reference to the RFQ or Last Purchase
Order, this will help the system to copy all the details in the RFQ on to the purchase order and
the relation of the RFQ and the purchase order is set in the system
If purchase order is created with reference the vendor details e.g. Vendor Address, Payment
Terms, Inco terms will be copied from the vendor master.
Purchase Order can also be created with out any reference, in this case the user will have to
enter all the details e.g. Vendor, material, pricing condition etc
Purchase Order will be made by ZZZ Group for those material for which the price is negotiated
for each transaction are subject to change for ever new transaction e.g. Base Oils , Additives etc.
For a particular transaction if the Payment Terms and Inco term are different from the vendor
master, the same can be changed in the Purchase order.
The pricing related conditions will be copied from the RFQ and also can be independently
maintained in the Purchase Orders. The pricing conditions shall be assigned a value either in
percentage terms, value terms or per quantity basis.

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The different conditions (primary and secondary price elements) get defaulted in the Quotations
or purchase order based on the pricing schema attached to the schema group field of vendor
master. New pricing conditions can also be added and existing condition shall be changed only
before first goods receipt entry posted against PO.
Material and Vendor related Excise and Sales tax details shall be identified using the Tax Code at
the Item level in PO. The tax codes will have to be entered in the PO at the item level and
contain the following information:
Excise Duty
Additional Excise duty
Special Excise duty
Sales Tax applicable / VAT related condition
Surcharges over tax as applicable for a specific region
Turnover tax
The excise duty shall be populated in the PO based on the Excise masters maintained for the
material code in the CIN version of SAP to be entered in the PO at an item level. Excise rate
master and material excise detail has to be maintained for proper excise duty calculation and
CENVAT claim.
The user shall specify the Plant, Purchasing organisation, Purchasing group, Material code,
quantity of the material in the purchase order.
Over delivery tolerances will be maintained in the purchase order as per the requirements for
e.g. imported material where excess receipts are expected to certain extent. In case if there is
an excess stock receipt beyond the over delivery tolerance identified in PO, receipts can be
made only after changing the quantities in PO.
Header text and Item text shall be maintained to communicate the vendor regarding specific
terms and conditions which are specific to the purchase
Savita will have the following document types for a purchase order.
Import Purchase Order
Domestic Purchase Order this will cover Subcontracting also

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Engineering, IT, Laboratory Non Stock Purchases and Services
Stock Transfer Order
Asset PO
Service PO
The number ranges will be different for each of the above document types and company code
this will help the user identify the Purchase order at a glance.
The system will create a purchase order number which will be system generated and the series
of the number will based on the document type and Company Code which is specified during
creation of the purchase order.
The PO will be amended for quantity as per the receiving plant on the receipt of the material
before the GRN
Condition types for CVD, Cess on CVD, Basic customs duty, Cess on customs duty and ADC will
be percentage based and in foreign currency for which the invoice verification for delivery costs
will be made in INR.
All the condition types will be copied to the new PO from the old PO along with the percentage
or value or quantity based rate.
The unwanted condition types will be deleted from the new PO.
All the secondary cost conditions will be identified in the PO with some vendor as no condition
can be added nor the value can be changed once a GRN is prepared.
Contracts will be prepared on the secondary vendors for transportation, barging, CHA,
insurance, etc and will be only used as reference; no data will be copied from the contract in the
PO by the system.
The secondary vendors will be changed at the time of GRN if different than that identified in the
PO.
Importing against Advance License: If the import receipts are against an Advance License where
no Custom Duty and CVD has to be paid, the amount liable against the Custom and CVD
conditions will to be identified against a Dummy Vendor in the PO. This vendor number will be

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same as AL number, which will be same as the Advance License Number. For creation of these
liabilities, all the duties and taxes will be identified in the PO (like any normal import PO). This
vendor will be credited with the duty liability and which will be subsequently settled against an
income clearing account.
On the sales side, a report will be generated to track exports obligations to help Finance create
the necessary entries.
The details of the same is explained in FI Blueprint
4.4.2 Exceptions and Variations
Retrospective Amendments are not available in SAP. The changes made to PO will not affect the
GRN which is posted before the changes. The changes shall be affected only to the subsequent
document posted after the changes.
Purchase Order Print layout will be developed
4.4.4 Conditions in Purchase Order
Condition types are the various cost carrier components in P.O that determine the value with
which the Material is valuated & how the reimbursement for the same is being carried out.
Conditions for import and local procurement will be different.
ZZZ will have the following condition
Basic Price
Discount
Surcharge
Freight
Cess i.e. Market Cess for NMMC
Survey Charges
Insurance
Barging

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Clearing and Forwarding
Wharfage
Pricing procedure is a summation of the condition type in a set sequence which helps the
system calculate the net price
There will two pricing procedure for ZZZ i.e. Local and Imports
4.4.5 Delivery Costs in Purchase Orders
The secondary vendor for freight, Insurance and clearing will be identified in the Purchase order
against the specific condition type. The secondary vendor can be changed during the good
receipt stage also.
The delivery condition charges shall be booked to a separate account code at the time of Goods
receipt. It is necessary to identify the Freight, Clearing, Insurance vendor in the PO for the
proper valuation of the material at the GRN stage. However at the time of preparation of GRN,
the actual vendor to whom the payment is to be made can also be identified. In case if the
transportation charges have to be paid to the material vendor than in delivery condition the
vendor field can be left blank & the freight gets automatically allocated to the Material Vendor
Freight Supplier can be changed at the GRN stage only if the planned delivery conditions
have been identified in PO. However the value of the delivery cost can be changed vat
the time of bill passing only.
Delivery Charges cannot be changed /amended in GRN
Any changes in the value of delivery charges (e.g. freight, Clearing, Insurance) can be
carried out at the time of invoice verification. Thus vendor can be paid based on the
actual invoice amount.
4.4.6 Excise and Sales tax related Details
User shall identify relevant tax codes in PO based on which the Excise Duty and Sales Tax shall
be calculated.
The user needs to select correct tax code in the PO
The user needs to select correct document type (order type) in the PO.

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The tax code shall be identified at item level in the PO
TDS shall be calculated in the Financial Accounting system. Please refer to the Business
Blueprint of Financial Accounting for details regarding TDS.
Excise and Sales Tax (VAT) will posted to a different account and will not be posted to
the stock account
4.4.7 Account Assigned PO (Consumption Orders)
Account Assigned PO will be used in case of materials which are non-coded e.g. Engineering,
Stationery, Laboratory items, Administration and other consumable where the stock tracking for
such material is not required and a cost centre can be directly debited for its consumption.
Specific requirement of any department can be booked using the account assigned PO and
identifying a cost centre linked to the department in the PO.
At the time of Goods receipt for such materials, stock of the material will not be
updated and directly the total cost of the procured material shall be debited to an
identified account assignment i.e. cost centre Mechanical, Civil, Electrical or internal
order.
4.4.8 Asset Purchase
All the asset purchases shall be linked to the asset class. Such PO shall be account assigned to an
Asset. Finance department shall provide the required details to the purchase department
regarding the Asset class and Asset number, which need to be identified in the asset PO.
All asset purchases shall be account assigned PO with account assignment as Asset. Before
raising Asset PO, FI will provide the Asset number.
4.4.9 Release Procedure for Purchase Order
Release procedures will be defined for the following documents:
Purchase Requisition
Purchase Orders
In case of Purchase Requisitions only Engineering Purchase Requisitions will follow a release
procedure as the engineering specification are to be vetted out.

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In case of Purchase Order the entire PO will follow a Release Procedure. Release procedure will
be different for each of the Purchasing Groups as per the person responsible (i.e. Imports, Local,
Service, Admin and Plant Purchases). The entire POs will be finally released by the MD. All types
of PO will have a release procedure including STO.
Purchase Order Print layout will be developed
4.5 High Sea Sales
ZZZ will use the High Sea Sales scenario for the sale of base oil. The process flow will be as
shown below

Create
Imports PO
Create Sales
Order
PR generated
automatically
Amend the
Imports PO
Post a GRN
Create
invoice in SD
Invoice
Verification
for the PO


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The PO has to be amended as the sales order will be prepared after the PO. The existing line
item has to be deleted / modified and new line item will be added with reference to the PR
generated from the Sales Order.
A statistical GRN will be made in the system causing the following accounting entries:
Dr. Cost of Goods Sold
Cr. GR/IR Account
This entry will eliminate the need for taking the material into stock, making customer delivery
and posting goods issue.
Customer invoice can be raised once the statistical GRN and the invoice verification are posted.


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5.Inventory Management
5.1 Material Receipt
A goods receipt is a goods movement with which the receipt of goods from a vendor or
from production is posted. A goods receipt leads to increase of material stock.
Material shall be received at the plants or the delivery address other than the plant
identified in the PO.
In case of Subcontracting PO, the finished goods shall be received at the plants from
where raw material was issued for processing.

Non - Stock material
Cost centre
Project
Other

Blocked stock ( Valuated ) MVT 101 (S)
Unrestricted Use stock MVT 101
Vendor
Stock
Consumption
Conditional
acceptance
GR blocked stock MVT 103
Goods Receipt

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5.1.1 Goods Receipt Procedure
In Goods receipt is done using Movement Type 101, Stock is directly posted to
unrestricted stock or quality inspection stock and vendor can be paid after invoice
verification.
Both rejection and acceptance cannot be done for the material on which quality
management is not activated. The system can not allow posting accepted quantity and
rejected quantity simultaneously in single posting and for such condition two step goods
receipt procedure is to be followed.
Irrespective of the procedure followed,
No material shall be received without any reference of the PO
ZZZ can use single step goods for material like spares, regular consumable items etc.
Any changes to the PO shall be reflected before preparation of GR
There shall be only one internal number range for the all types of Goods Receipt across
all the plants.
Goods Receipt for Local Material

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Create RFQ
WRT PR
Receive Quotations
Create Purchase Order
PR
Through MRP
Manual
YES NO
Create RFQ
Manually
YES
Compare Quotations
Accept Reject
Release Purchase Order
Close Quotation
with Reason
LOCAL PURCHASE ORDER

Scenario IA: Good receipt of Excisable Material
CENVAT related details should be captured by the user before preparing the GR. User
shall enter the Vendors Excise Invoice details in the SAP CIN module. The reference of
the internally generated document shall be given at the time of GR. At the time of GR,
RG23A Part I shall be gets updated if excise invoice has been captured before GRN.
Part II entries will be generated at the time of Excise Invoice Verify and post.
In case if Excise Invoice is captured after GR, Part I and Part II entries will be updated at
the time of Excise Invoice Verify and Post

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If Excise Invoice has not accompanied the material, the material can be received into
unrestricted stock. Whenever Excise invoice comes, Excise Invoice is captured after GR,
Part I and Part II entries will be updated at the time of Excise Invoice Verify and Post.
Invoice verification can be entered only after the excise invoice verified & posted.
If Vendor has not given the excise invoice for excisable material, then user has to change
the PO as non excisable before posting of goods receipt and vendor invoice.
Scenario IA: Good receipt of Non Excisable Material
If the material is not excisable then user shall prepare the GRN using movement 101
without use of CIN Excise Module.
The following accounting entry will be passed in the Financial Accounts
Dr. RM/PM Stock Account
Cr. GR/IR Account
Cr. Freight Clearing Account
Excise Entry for revenue purchases
Dr. Cenvat BED/ AED/ SED Account
Cr. Cenvat Clearing Account
Excise Entry for Capital purchases
Dr. Cenvat BED/ AED/ SED Account
Dr. Cenvat on hold Account
Goods Receipt for Import Material
Import good receipts will be carried out either at the outside storage location or directly at the
Manufacturing Plant
Amendments will have to done in the PO, for quantity splitting as per receiving plant and any
other condition if required
The break up of the pricing elements (i.e. freight, Barging, CVD etc) will be copied from the last
PO
If the material is received at Outside Storage location, Stock transfer Order will be used to
transfer the material to the manufacturing plant.

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Create RFQ
WRT PR
Receive Quotations
PR
Through MRP
Manual
YES NO
Create RFQ
Manually
YES
Compare Quotations
Accept Reject
Release Purchase Order
Close Quotation
with Reason
Invoice Verification for Duties i.e. Planned
Delivery Costs
Capture Part I
Post GRN
Post Part II
Transfer Order
Transfer Order
Confirmation
IMPORTS PURCHASE ORDER

Scenario IIA: Goods Receipt for imports at Outside Storage Locations
Preparation of PO
Release of PO
The invoice verification shall be carried out for CVD before the goods receipt of the
material in the system.
Posting of invoice verification for duty charges as delivery costs
The excise invoice (i.e. CVD) shall be captured and posted in CIN.

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The GRN shall be prepared with respect to PO.
Posting of part 2 in dummy excise registration
Preparing of Transfer order & confirmation for warehouse
Placing in Bin

Scenario IIB: Goods Receipt for imports directly at Manufacturing Plant
Preparation of PO
Release of PO
The invoice verification shall be carried out for CVD before the goods receipt of the
material in the system.
Posting of invoice verification for duty charges as delivery costs
The excise invoice (i.e. CVD) shall be captured and posted in CIN.
The GRN shall be prepared with respect to PO.
Posting of part 2 in respective plants excise registration
Preparing of Transfer order & confirmation for warehouse
Placing in Bin

Accounting Entry:
Invoice Verification for Custom Duty when material not purchased against Advance License
Dr. Cenvat Clearing Account
Dr. Custom Clearing Account
Cr. Vendor Account
Invoice Verification for Custom Duty when material purchased against Advance License.
Dr. Custom Clearing Account
Cr. License Vendor Account (Recon A/c-adv license receivable A/c)

Goods receipt when the material is not purchased against advance License
Dr. Stock Account
Cr. GR/ IR Account
Cr. Custom Clearing Account
Goods receipt when the material is purchased against advance License

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Dr. Stock Account
Cr. GR/ IR Account
Cr. Custom Clearing Account
Capture Excise Part II when the material is not purchased against advance License
Dr. BED Account
Dr. Cess Account
Invoice Verification for Foreign Vendor
On receipt of vendor bill the following entry will be passed:
Dr. GR/IR Account
Cr. Vendor Account

Scenario IIC: Goods Receipt for imports in Manufacturing Plant from Outside Storage
Locations (Stock Transport Order)
Creation of Stock transport order with supplying plant as Outside Storage Location and
receiving Plant as Manufacturing Plant
Creation of Replenishment Delivery
Preparing of Transfer order and Confirmation for warehouse
Creation of Post Good issue to reduce the inventory at Outside Storage Location
Pro-forma Invoice
Excise Invoice at Supplying Plant (i.e. Outside Storage Locations)
Good receipt at Receiving Plant (i.e. Manufacturing Plant)
Preparing of Transfer order and Confirmation for warehouse
Excise Invoice post and capture in receiving plant

Scenario IID: Weigh Bridge Interface

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Other Good Receipts
Scenario III: Goods Receipt for Assets Material / Spares
The cycle of local /import GRN holds good for capital materials.
The type of material (Asset) shall be specified while capturing the excise invoice.
The GRN shall be prepared with respect to excise invoice. The system shall update
RG23C Part I after the GRN has been posted.
The excise invoice shall be posted and the system shall pass an entry for claiming 50%
Modvat for the current year updating RG23C Part II. In the subsequent year remaining
50% Modvat shall be claimed.
Scenario IV: Goods Receipt for Consumable materials
The regular GRN cycle holds well for the consumable materials with the exception that
system shall not update the stock of the material.
It shall be assumed that the material is consumed after good receipt no separate goods
issue transaction needs to be carried out.
Accounting entries in FI at the time of GRN
Dr. Consumption A/c
Cr. GR/IR Clearing A/c
Scenario V: Goods Receipt for Production Order
Goods shall be received in the concerned plant and storage location with respect to
production order. This shall result into converting of stocks from work in progress to
semi finished material or finished good. This shall result into increase of stocks in the
storage location.
Accounting entries in FI at the time of GRN
Dr. FG inventory A/c
Cr. Factory output A/c / Cost of production A/c
Scenario VI: Goods Receipt against Returnable Gate Pass
Service PO will be created for the repairs to be made along with the charges
The inventory of the asset eg pump or motor will be generated against a non valuated
material code
A transfer posting to the subcontractor stock will be entered in SAP to keep a track of
the stock
The material will be sent out of the gate against a printed copy of Returnable gate pass
from SAP

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On receipt of the repaired asset the transfer posting made earlier will be reversed
Service entry sheet will be posted for the repair charges and the invoice verification will
be done for the same. The GRN for the services will be posted automatically in the
background.
Scenario VII: Goods Receipt for Subcontracting Purchase Order and Material received in
Plant and transferred to Subcontractor

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Create RFQ
WRT PR
Receive Quotations
PR
Through MRP
Manual
YES NO
Create RFQ
Manually
YES
Compare Quotations
Accept Reject
Enter Transfer Posting
Close Quotation
with Reason
Create Subcontracting Challan
Reconcile Challan
Post GRN
Complete Challan
SUBCONTRACT PURCHASE ORDER

Scenario VIII: Goods Receipt for Subcontracting Purchase Order material is directly received
at Subcontractor


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Creation of PO for
Child Material e.g.
Plastic Granules
Receipt of Material
Direct at the
Subcontractor
Receipt of Parent
Material e.g. Plastic
Containers
Stock Report showing
stock at Subcontractor
Consumption of Child
Material as per BOM
(STD) in Background
Consumption of Child
Material not as per BOM
(STD) in Background
Receipt of Parent
Material
Stock Adjustment of
Child Material e.g.
Plastic Granules
Raise a Credit Note
to Subcontractor
CENVAT credit taken
by Subcontractor. Not
Captured in SAP
CENVAT Credit
Taken by Plant as per
Subcontractor Excise
Challan
Child Material
Valuation at Plant will
be inclusive of Excise
Parent Material
Valuation at Plant will
exclusive of Excise

The PO shall be prepared on the subcontractor for the End Product (incoming material)
The components (outgoing material) required for the manufacture of the end product
shall be specified in the PO manually or based on the Bill of Material and will be supplied
by ZZZ.
The components shall be issued to the vendor with respect to the subcontracting PO
through transfer posting. This will result in the posting and identification of stocks at the
vendor location. The raw materials can also be received directly at the subcontractor by

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posting a GRN for the PO in which the subcontractor has been identified in the delivery
address of the PO.
No Accounting transactions shall take place when stocks (components) are transferred
to the vendor location.
A 57F4 document (Excise Challan) shall be generated and printed (optional) based on
the transfer-posting document in CIN.
On the receipt of the End Product from the vendor (subcontractor) at plant, the GRN
shall the prepared with respect to the subcontracting PO and 57F4 document.
This shall result in the posting of the consumption entries for the components lying at
the vendor location.
The 57F4 document shall be reconciled & completed in CIN after final receipt of the End
Product.
Logistics Invoice Verification shall be carried out for the labour charges for the end
product supplied by the Vendor.
The subcontracting PO shall have the Labour charges as the price component.
5.1.2 Excise details to be captured at goods receipt from vendor
User would capture excise-related details at the time of preparing the GR. User will
enter the Vendors Excise Invoice details in the GRN transaction. At the time of GR,
RG23 A or C Part I will get updated.
Part II entries will be generated at the time of Excise Invoice Verify and Post stage which
will be done after GR
In case if Excise Invoice is captured after GR, Part I and Part II entries will be updated at
the time of Excise Invoice Verify and Post.
If Excise Invoice has not accompanied the material, the material can be received into GR
Blocked stock. The GR block stock shall not update the total valuated stock and will not
be available for usage. Whenever Excise invoice comes, the material can be taken to
unrestricted stock from GR block stock. However, from unrestricted stock the material
cannot be moved back to GR block stock.

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If Excise Invoice has not accompanied the material and material is required for use in
production the user can post the goods receipt and subsequently post the CENVAT with
the reference of PO and goods receipt material document number.
5.1.3 Gaps / Issues Identified and Solutions
As per standard SAP only two weights can be captured in the GRN out of which one is actual
GRN quantity the other one can be either BOE/ BL quantity or actual quantity received at the
dock. Development will be done to capture four different weights.
Transport vendor and the barge vendor will be changed at the time of GRN if different than that
identified in the PO.
Report for outturn i.e. the weights captured at the different stages will be developed
Returnable Gate Pass
Non Returnable Gate Pass
5.1.5 Interfaces
Weigh Bridge Interface will be developed to meet the business requirement of identifying the
quantity in weight and volume of the raw materials (e.g. Oils) which are received in Tankers.
5.2 Material Issues (Consumption)
A goods issue (GI) is a good movement with which a material withdrawal or material issue, a
material consumption or a shipment of good to a customer is posted. A good Issue leads to
reduction of the stocks. Material shall be issued to various departments. The issues can be
specific against a production order, maintenance order or generally to a cost centre against a
reservation. The consumption entries shall get posted at the time of goods issue. Other than
high value maintenance spares, all materials will be charged to consumption as soon as it issued
from the main stores. In certain cases the material is issued to production or cost centre but is
not identified as consumption. For e.g. materials issued to shop floor locations, for such cases, a
separate storage location will be identified in the system for tracking the stock on the shop
floor. High value maintenance spares such as chemical & fluxes shall be transferred from Main

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Stores storage location to the Shop floor location. Hence, the issues for production/ cost centre
from the main storage will be shown as transfer posting from storage location to storage. No
accounting entries shall be generated for the transfer posting. On charging the materials to a
work order or cost centre, issue to production order/cost centre will be recorded. Thus exact
consumption quantity will be recorded for the production order. For other products, which can
be issued, as per exact requirement, a material issue to production order will be carried out
from the main storage location directly.
Negative stocks shall not be allowed in the system.
The materials such as chemicals, oils, engineering goods shall be stored in the defined stores
and directly issued to the production order or cost centre if required.
The materials such as high value maintenance spares shall be stored in the engineering stores
and transferred to the shop location and subsequently the issue shall be booked against
maintenance order or cost centre if required.
If stores want to issue material other than originally planned in the reservation then material
has to be changed in the reservation with the required alternative material.
There shall be only one internal number range for all types of Goods Issue and Transfer Posting
documents across all the plants.
When the material is issued against the production order the following accounting entries will
take place in FI
Dr. RM stock A/c
Cr. Inventory Change A/c
5.2.1 Transfer Postings
During the normal business activity it may be essential to move the material physical from one
place to the other within the same company code, or within the same plant or move it from one
stock type to another or from one material to another. These can be done in SAP by transfer
posting.

The major material transfers that can be carried out in SAP are
Plant to Plant

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Storage Location to Storage Location
Stock to Stock i.e. unrestricted to blocked
Batch to Batch
Bin to Bin
Material to Material.
5.2.2 Plant to plant transfers
If the material is transferred from one plant to another of the same company code Stock
transport orders STO will be used wherein the transfers are carried out using the Sales
functionality of Delivery.
Transportation cost will be included in the PO and cost of transportation will be loaded
onto the stock valuation of the material at the receiving location.
STO will be used to transfer the material from Trichy / Mohali to the C&F agents. In the
STO the MAP (Moving Average Price) will defaulted as the Basic price and the transport
cost will be identified as one of the price
If material is moving from one plant to another plant. The excise invoice needs to be
prepared in CIN for the transfer of the excisable material. Excise will be debited at
originating plant and same amount shall get credited at the receiving plant by capturing
excise invoice details of the issuing plant.
5.2.3 Transfer of material from Manufacturing Plant to Stocking Plant or C&F (with Excise
invoice)
The transfer shall be carried out using Stock Transport Order (STO) with outbound
delivery for finished goods. STO shall be created in the MM module by the supplying
plant for the receiving plant. Based on the STO, delivery shall be carried out in Sales and
Distribution (SD) module of SAP. The excise invoice will also be prepared at the time of
good delivery. The material shall be received in the receiving plant using movement type
101 in Materials Management. Till such time goods shall be tracked as stock-in-transit.
Stocking Plant or C&F can maintain the finished goods stock in batches, which are
received from manufacturing plant.

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Stocking Plant or C&F can only avail the CENVAT mentioned in the excise invoice
received from manufacturing plant.
5.2.4 Material Transfer from Storage Location to Storage Location
The material can be transfer from one location to another within the plant. This
transaction does not involve accounting entry for the material.
ZZZ can use this transaction to transfer the material form material inspection storage
location to stores. Similarly the materials like spares that are issued to the specific
departments can be transferred from stores to the specific departments and
subsequently the consumption can be booked for the material if required.
5.2.5 Material to Material Transfer
If a material changes over time in such a way that it no longer corresponds to the
features defined in the material master record, but to the features of a different
material, the user can carry out transfer posting from material to material.
A transfer posting from material to material results in the transferred quantity being
managed under a different material number. A material master record must exist for
the receiving material.
Parallel to the material document, an accounting document is posted. The issuing
material master record determines the value of the transfer posting.
The material to material transfer should be done in consultation with accounts as it
involves accounting entries being posted for the material.
Both the materials should have the same base unit of measure
5.2.6 Stock to stock
When the quality inspection posting is completed the material transfers from Quality stock to
Unrestricted use stock. Similarly it is also possible to move unrestricted use stock to a specific
sales order stock or specific project stock.

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5.2.7 Bin to Bin transfer
As with all stock movements, to transfer stock from one storage bin to another storage bin
within a warehouse number you first create a transfer order.
To transfer stock of a material from one storage type to another, you can display the bin stock of
the source storage type (same as with the bin status report). From this display you can select the
stock to be transferred and create the respective transfer orders.
ZZZ will use the bin to bin transfer posting for transferring the material from bonded to ex
bonded location.
The quantity of material in the bonded and the ex bonded location can be reviewed in the bin
status report for the section type bonded or ex bonded

5.3 Material Returns
A goods return procedure can be divided in following steps:
Return to vendor after good receipt or if the material fails in the production
Return of excess material to stores/storage location from production or cost centre
5.3.1 Material Return To vendor
Material can be returned back to the vendor if the quality department has rejected it or the
material has been returned from the production department due to some defects.
The material shall be returned to the vendor using the
Return to vendor movement type in SAP or
Creating a Return PO
Return movement, user can send back the material of a single document (GRN). The
return document shall refer to the GRN document against which the material was
received.
The excise duty shall be reversed and gate pass shall be generated using the Excise for other
movement transaction of SAP.
Using the Return PO, user can send many materials back to vendor. However, the return PO will
not refer to any specific GRN or material document.
The excise duty shall be reversed and gate pass shall be generated using the Excise for other
movement transaction of SAP. The user shall manually enter the excise duty.
For vendor returns,

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If the bill of the vendor has been passed and later the material is rejected on shop floor,
the vendor liability is not reduced automatically.
At the time of vendor return, system credits the stock account and debits the GR/IR
account but vendor does not get debited automatically.
A separate FI entry needs to be passed in financial accounting system if the vendor is
not providing with the replacement for the rejected material.
If the vendor is replacing the rejected material, create the FI entry for debiting the
vendor liability. Create a new PO for the replacement material and carry out the receipt
and bill passing procedure for the same.
5.3.2 Material Return to Stores
Material can be returned back to the stores from Production. Two different options are available
to receive back the material that has been issued.
The material can be returned back and the consumption can be reversed using the reference of
the original issue document. However, in this route full quantity of a material, which was issued,
is returned back and part quantity return is not possible. But the consumption reversal entries
and the value attached to it are based on the original issue document.
Second route is returning the material without the reference of the original issue document. In
this case material will be posted at moving average price of the material at that point of time.
This procedure can also be used for scrap return and serviceable items from shop floor.
ZZZ to give the layouts & formats
5.4 Material Reservation
With this component, user makes a request to the warehouse to keep materials ready for
withdrawal at a later date and for a certain purpose. This simplifies and accelerates the goods
receipt process. A reservation for goods issue can be requested by various departments for
various account assignment objects (such as cost centre, order, asset, etc.).
The purpose of a reservation is to ensure that a material will be available when it is needed. It
also serves to simplify and accelerate the goods issue process and prepare the tasks at the point
of goods issue.
It is also important that reservations are taken into account by Material Requirements Planning
(MRP), which means that required materials are procured in time if they are out of stock. The
system makes reservations at plant level.
When production / maintenance order is created, the components of order from the storage
location are reserved automatically. User cannot manually process automatic reservations. For
example, it is not possible to change reservations for an order directly. User has to change the
components in the order. The system then updates the reservation.

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ZZZ can use the material reservation for raw materials, spares and engineering stores materials
related items to take care of non-availability of the material. If the material stock goes below the
reserved quantity, the system will result into generation of Purchase Requisition after running
the MRP, based on the reorder level / material planning norms set in the material master.

Flow Diagram for Goods Issue

Manual reservations, Stock Update
Automatic Reservations Consumption A/C
For Production

When a reservation is entered, the following events occur in the system:
The system creates a reservation document, which serves as proof of the request.
In the material master record, total stock and unrestricted-use stock of the material
remain unchanged. Reserved stock is increased by the reserved quantity and can be
seen in the stock overview (MMBE).
In MRP, available stock is reduced by the reserved quantity. This is visible in the current
stock/requirements list (MD04). The reservation causes an entry to be made in the
requirements planning file.
Note: The procedure of creating the reservation does not mean hard reservation of the
material. If the stock exists for the material, it can be issued to another entity
irrespective of the material is reserved or not, i.e. system does not take into the
consideration the priority of the reserved materials.
By transfer posting however the material may be allocated from unrestricted use stock
to specific sales order or project stocks.
The purpose of reservation is only limited to consider the stocks of the materials for
MRP purpose and create Purchase Requisition for the material to avoid the situation of
non-availability of the material.
All the reservations get automatically closed after the material is issued to the order or
reservation.
Reservation
for material
Goods Issue

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All the open reservations for which the materials have not to be issued must be closed
manually.
All the reservations that are created automatically for production order must be closed
(if open material issue exists) during final confirmation of the order.
On periodic basis the open reservations may be closed.
5.5 Stock transfer Order

The material transfers from one plant to another plant or C&F will be supported by the stock
transfer order. The stock transfer orders are purely for material movement within ZZZ group or
to the C&Fs and not to be issued to any external vendor of ZZZ.
Definition: In stock transfer processing, goods are procured and supplied within a company. One
plant orders the goods internally on another plant (receiving plant/issuing plant). The goods are
procured with a special type of purchase order with SAP i.e. the stock transport order. User can
request and monitor the transfer of goods with a stock transport order. The delivery can be
processed in Inventory Management or in Sales and Distribution (SD Shipping). The delivery
should be processed through SD to take care of the billing.
When transferring the raw material, semi finished goods like oil for packing to Mohali; finished
goods to C&F, spares etc. from one plant to another or various depots, the stock transfer order
shall be used.
The requesting plant shall raise the stock transport order on the supplying plant for example, in
case of transfer of oil for packing from Trichy to Mohali; Mohali will raise a Stock Transport
Order, which is a form of a purchase order on Trichy, the material to be transferred using the
stock transport route needs to be maintained in the Sales area view of the plants.
The material shall be transferred at the current valuation rate of the material in the supplying
plant. While transferring the common raw material between the plants, excise will be debited in
one plant and shall be credited in the receiving plant.
5.5.1 Characteristics of a Stock Transfer Order
The quantity posted from stock of the sending plant is first of all managed as stock in transit of
the receiving plant. Only once the goods receipt has been entered the quantity is posted to the

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unrestricted-use stock of the receiving plant. This enables the quantity "on the road" to be
monitored. Additional Delivery costs can be entered in the stock transport order.

5.5.2 Processing of Stock Transfers between the Two Plants


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Stock Transfer Order
Transfer
Order
Post Goods Issue
Excise invoice at supplying
plant
Pro-forma Invoice
Replenishment Delivery
Transfer
Order
Confirmation
Transaction at
supplying plant
GRN at receiving plant
Excise invoice capturing at
receiving plant
Transfer
Order
Transfer
Order
Confirmation
Transaction at
receiving plant

Insurance Declaration to the insurance company will be carried out outside the SAP system. SAP
will not provide any information regarding the insurance declarations.
5.6 Vendor Evaluation
The vendor evaluation shall be carried out for particular criteria such as quality, delivery and
quantity. The quality score shall be generated based on the usage decision specified in QM
module and the score related to a delivery shall be generated based on the deviation between
actual delivery date and planned delivery date. The score related to quantity reliability shall be
generated based on the deviation between goods receipt quantity and order quantity.
Data required for vendor evaluation

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TIME PERIOD: The days to be considered for vendor evaluation e.g. 365 or 180 days. The system
shall consider the history data pertaining to last 12 or 6 months from the date of evaluation.
WEIGHTAGE: The weightage to be specified for each evaluation criteria. (Could be equal or
unequal)
E.g. Price: 30
Quality: 20
Delivery: 50
Total: 100 %
Each criterion can have more than one sub criteria
E.g. On time delivery: 60
Quantity reliability: 40
Each criteria /sub criteria shall have different scoring pattern based on the deviation of each
criteria/sub criteria from the standard.
E.g. On time delivery
For the above criteria the scoring pattern can be assumed like

Percentage Deviation Score for Evaluation
99 1
80 20
60 40
40 60
20 80
00 100
-20 80
-40 60
-60 40
-80 20
-100 1

Explanation: a) if the deviation of the actual delivery date and planned delivery date is 80%, the
vendor shall score 20. b) If the deviation of the actual delivery date and planned delivery date is
40%, the vendor shall score 60.

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The max (+/-) Deviation permitted for a material shall be specified in the purchasing value key
configuration. The purchasing value key has to be maintained in the material master e.g. Key A1:
20 days as delivery variance
The A1 key denotes if the vendor delivers a material before/after 20 days from the planned
delivery date then the vendor shall be awarded zero score. If the vendor delivers a material 5
days after planned delivery date, the score shall be based on the percentage deviation with
respect to 20 days i.e. 5X 100/20 = 25%. The system shall find out from the configuration the
nearest value if percentage deviation for the said criteria and allocate a score. In the mentioned
scenario vendor shall score 80.
The vendor evaluation for price level as criteria is calculated as follows
To determine a vendor's price level, the system compares the vendor's effective price
with the market price for the material.
The system first checks whether the buyer has maintained a market price for the
material. (Special condition record)
If not, the system calculates the market price, which is equal to the average of the
effective prices for all vendors supplying this material. The system then applies the
effective price for the vendor from the conditions.
The vendor's effective price is then compared with the market price and the percentage
variance determined.
The system then assigns a score to the variance in accordance with the settings made in
Customizing.
The limitation of the vendor evaluation for price criteria is that system does not take
into consideration PO price but it always compares material market price with effective
price maintained in the info Record.
The vendor evaluation for quantity reliability as criteria is as follows:
When goods are received against a purchase order, the system checks whether the
quantity received are the same as the quantity ordered. If this is not so, the system
works out the difference and converts it into a percentage variance using the following
formula:

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GR quantity - order quantity / order quantity x 100
The system issues a score for this percentage variance as defined in Customizing.
The new score is then included in the vendor's previous score for the sub criterion. To
calculate the new score for the sub criterion from the already existing composite score
and this new individual score the system applies the smoothing factor Quantity variance
defined in Customizing.
When user run a new evaluation, the system calculates the average of the individual
scores for all materials to obtain a score for the vendor for adherence to the
confirmation date.
Min. delivery quantity % specified in the material master purchasing value key plays an
important role in the evaluation. The min. delivery qty. % signifies that min. qty. to be
delivered in the order for the goods receipt to be included in the evaluation. In this way,
user can prevent a vendor from receiving a good score for a punctual delivery, where
the quantity delivered was insufficient. If this value is not maintained in purchasing
value key of material master, the system shall pick up the average value specified in the
customisation irrespective of material and vendor.

The score for on time delivery shall be calculated as under
At the time of a goods receipt against a purchase order, the system checks whether the
delivery was on time or late:
GR date - delivery date / delivery date = date variance
If the delivery was on time, the system checks whether a minimum delivery quantity is
to be taken into account.
It checks the Minimum delivery quantity/standardising value for delivery time variance
from material indicator.
If the indicator has been selected, it checks whether a value has been maintained in the
material master record:
If a value exists, it is used. If no value exists, the value from the Minimum delivery
percentage field is used. If there no such value in this case either, goods receipts of
fractions of the order quantity are included in the calculation of the score.

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If the indicator has not been selected, the value from the Minimum delivery percentage
field is used. If no value exists, goods receipts of fractions of the order quantity are
included in the calculation of the score.
If the minimum delivery quantity is not reached, the system does not determine a score
for the goods receipt.
If the minimum delivery quantity is reached and the delivery date adhered to, the variance is
zero and the system awards the highest points score for the relevant goods receipt.

If the delivery is not on time, the system calculates the date variance in days and
converts it into a percentage variance.
In the process, the system searches for the standardising value as follows:
It checks the Minimum delivery quantity/standardising value for delivery time variance
from material indicator.
The system then awards the score user defined in Customizing for this percentage
variance. The new score is then included in the vendor's previous score for the sub
criterion. To calculate the new score for the sub criterion from the already existing
composite score and this new individual score the system applies the smoothing factor
Date variance defined in Customizing. When user run a new evaluation, the system
calculates the average of the individual scores for all the materials to obtain a score for
the vendors on-time delivery performance.
If a goods receipt covers several schedule lines, the Vendor Evaluation system performs
this calculation for each schedule line.
The score for incoming goods receipt subjected to inspection is calculated as follows:
If a material is subject to incoming inspection, part of the delivered material is checked
by the quality assurance department when goods are received against a purchase order.
An inspection lot is created. After the inspection or testing, the person responsible in
Quality Management then enters a result and makes a decision as to whether the
material can be used. (Usage decision code has a value attached to it. based on which
the score will be calculated. minimum score has to be one)

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All the incoming inspection lots are stored in a file with their scores.
When user run an automatic re-evaluation for a vendor, the system selects all the
incoming inspection lots for the vendor that lies within the validity period and calculates
the average of the score.
The result is the vendor's score for the quality of goods received.
The data required from ZZZ for carrying out vendor evaluation:
Market price for each material and score to be awarded based on the percentage
deviation that shall be considered as a reference for calculating the deviation of the
vendors average price for evaluation.
Usage decision codes with the respective quality scores. (Taken care in quality module)
Purchasing value key (material) specifying the maximum deviation permitted for a
material in terms of days and values in terms of percentage of deviation and respective
score (please refer the above mentioned table with the example). Please note that
purchasing value key can have under delivery / over delivery tolerance along with
maximum tolerable deviation allowed for a delivery.
Purchasing value key is used in Material master with each of the Item code.
5.6.1 Assumption
All the criterias & sub criteria are with weightage will be finalised on discussion in the
configuration phase. Vendor rating will be calculated for a vendor and purchasing organisation
combination
Vendor evaluation can happen only after the required customizing is complete. There has to be
enough transactional data in SAP for same.
5.7 Physical Inventory
There are various physical inventory methods available in SAP
Periodic inventory
Cycle counting
ZZZ will be using periodic physical inventory method

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The physical inventory process can be single step, two steps or three steps, ZZZ to use single
step procedure.
Three step procedure:
Periodic Physical inventory procedure shall be carried out in the system; User will create
a physical verification document in SAP system. Based on the actual physical stock, user
shall enter the actual count of material with reference to the physical verification
document number. The same document shall be printed for easy verification.
In case of differences, material can be recounted.
The posting of the differences shall be a separate activity based on which the stocks
shall be reorganised- both quantity and value terms. The posting of differences in the
inventory shall be booked to a separate account code. The posting of differences will be
subject to approval of the higher authority.
Stocks shall be blocked for Posting during Physical inventory process.
Posting Block indicates that no goods movements involving the materials listed in the
physical inventory document can be posted for the duration of a physical inventory
count.
Single step procedure:
User will enter the actual physical stock in the system (MI10) the system will create the
PID and post the difference at the same time in the background. An accounting
document will be generated along with the PID.
5.7.1 Physical Inventory in Warehouse Management
This component allows you to carry out a physical inventory of your companys warehouse
stocks for balance sheet purposes.
Integration with MM as the physical inventory process will be updating the base document
/ reference document in MM. The physical inventory differences should be cleared both in WM
and MM.
Cycle Counting: 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

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indicator set for the materials. The Cycle Counting Method of Physical Inventory allows fast-
moving items to be counted more frequently than slow-moving items.
Regardless of the physical inventory method, the process of physical inventory can be divided
into three phases:

1. Physical Inventory Preparation

Create a physical inventory document.
Blocking Materials for Posting
Print and distribute the physical inventory document.

2. Physical Inventory Count

Counting stocks
Entering the result of the count on the physical inventory document printout

3. Physical Inventory Analysis

Entering the result of the count into the system
Initiating a recount, if necessary
Posting inventory differences
Procedure for Physical Inventory in Warehouse Management - SAP Scenarios

S. No

Procedures

TCODE

Input

Output

1

Create a Physical
Inventory document

LI01N

Inventory document

2

Activate Physical Inventory

LX22

Inventory document

Inventory document

3

Print count sheet

LI04

Inventory document

Inventory document

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S. No

Procedures

TCODE

Input

Output

4

Inventory count

LX26

Inventory document

Inventory document

5

Entering count results

LI11N

Inventory document

Inventory document

6

Change count results

LI12N

Inventory document

Inventory document

7

Recount on need basis

LI14

Inventory document

Inventory document

8

Generate difference
report

LX17

Inventory document

Inventory document

9

Differences clearing in
WM

LI20

Inventory document

Inventory document

10

Differences posting in
Inventory Management

LI21

Inventory document

Inventory document

The process of physical inventory in WM will only be used for the materials/storage locations for
which the WM is activated for all the other materials/storage locations the normal inventory
management physical inventory process will be used.
5.7.3 Authorisation Requirements
Only the concerned staff should be authorised. Write-off authorization should be with the
senior management only.
5.8 Logistics Invoice Verification / Bill Passing
This is the last part of the procurement cycle; the vendor invoice is verified and entered in the
system. ZZZ Accounts department will carry out this as detailed in the FI blue print.

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5.8.1 Process flow
ZZZ shall use Logistics Invoice Verification (LIV) and no changes in the proposed account
codes shall be carried out.
Bill Passing or Logistics Invoice Verification shall be GR based Invoice Verification
default. Only in certain exceptional cases like Import PO, the LIV can be PO based.
The import PO bill passing shall be carried out based on the exchange rate of the posting
date. It is assumed that the Exchange rate conversions will be entered on periodic basis
(daily recommended) to reflect the exact rate on the date of posting. The defaulted rate
cannot be changed in the LIV transaction.
Invoices presented by the supplier can have variances from the system proposed values.
The user can accept the rate differences by increasing the rate as proposed by the
system. However, system identifies such invoices as having variances and checks for the
various tolerance limits identified in the system.
If there are differences between the amount proposed by the system and the actual
amount in the vendor invoice, user can change the amount and post these differences.
The system cannot provide the reason for such differences.
To accept the difference, user shall change the value suggested by the system
Quantity Changes is not recommended by the system
While posting the invoice, the system will post the differences to the Stock account if
the material is having the price control as moving average and the stock is available. The
system also updates the purchase order history with the changed data. If the stock is
unavailable the differences are posted to the Price difference account.
Invoices containing variances within defined tolerance limits shall be accepted by the
system. Invoices exceeding the Tolerances limits shall get blocked for payment.
The various parameters on which the invoice can be blocked are Price, Quantity, and
Order Price Unit Variance and Delivery variance.
Blocking based on Delivery Date Variance (Value variance based on delivery date
variance) is not required.

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ZZZ shall keep 5% upper tolerance limits to avoid unnecessary blocking in case of
increasing in price, tax, freight etc.
All the blocked invoices need to be released before the payment can be made against
the blocked invoice in FI. Invoices shall be released in a separate transaction. User shall
cancel the blocking indicator that was set when the invoice was posted. The
authorisation of the transaction shall be controlled through authorisation profile of
SAP.
The differences arising due to foreign currency exchange rate variation at the time of
Invoice Verification (not Bill Payment) shall get loaded to inventory (if there is sufficient
stock coverage). Foreign Currency Exchange variations can be identified only at the IV
stage. (And not at GR stage). In case of insufficient stock, the differences will go to Price
difference account.
Credit note on vendor shall be generated through FI module if Bill has been passed and
paid to the vendor and later the adjustment needs to be paid.

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6.Excise JVs
Excise JVs can be used for the following functions:
Scrapping of material,
Posting any difference in excise amount arising out of wrong data entry,
Making adjustment postings for materials not used in Production,
Making adjustment postings for money transferred to PLA and
Making adjustment postings for additional excise paid by vendors.
Adjustment of CENVAT at later date (say disputed matters).
Each plant and C&F shall be identified as excise group in SAP. The excise registers are
maintained at excise group level.
The external locations will be attached to a dummy plant which will have a dummy
excise registration and excise group
Accounting Entries for excise in FI during Scrapping through material write off
Dr. Cenvat clearing A/c
Cr. BED A/c
Cr. Ecess A/c

Accounting Entry when liability is more than Cenvat Receivable during utilization
Dr. Cenvat Payable Account
Cr. Cenvat RG23 A/C BED/AED/Ecess account
Cr. PLA BED account
Cr. PLA Ecess account
Cr. PLA AED account
Creation of TR6 Challan
Dr. PLA BED account
Dr. PLA Ecess account
Dr. PLA AED account
Cr. PLA on hold account


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Payment of excise Duty
Dr. PLA on hold account
Cr. Bank account
Accounting Entry when liability is less than Cenvat Receivable during utilization
Dr. Cenvat Payable Account
Cr. Cenvat RG23 A/C BED/AED/Ecess account

The accounting entries for additional excise through excise JV will be similar to the entries as in
the case of excise entries for GRN of local or import purchase.
The accounting entries for reducing the excess duty posted wrongly through the other
adjustment transaction of excise JV will be same as that of the scrapping entries shown above.


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7.Scrap Identification
7.1.1 Process flow
In some cases material gets rejected or becomes useless due to expiry or damage. The scrap
shall be identified as non-valuated material in the system. A separate material code shall be
maintained for each material to be treated as a scrap in the system. Scrap yard or store shall
receive scrap, as a scrap material or from cost centre. Scrap shall be tracked only on quantity
basis. Non-stock material will be brought into stocks just before the sale transaction occurs. In
ZZZ such kind of materials can undergo following treatment
Material is scrapped but can be sold: The sale of scrap will be handled through SD
module of SAP.
Material is destroyed
The material that has to be scrapped will be reduced from the stock using the scrap movement.
Stock will be reduced and the cost of the destroyed material shall be accounted in a special
account code and a cost centre
CENVAT claimed for all such materials will have to be reversed using Excise JV with reference to
the original excise invoice number.
The sources of scrap material will be:
production returns unfit for regular use/ unfit for return to vendor
non salvage sales returns
Customer returns beyond repairs
Inspection sample from QM department
Damaged stocks in warehouse
Accounting Entries in FI during Scrapping
Dr. Scrap A/c
Cr. Stock A/c

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8.Information System in MM
The following reporting requirements are met directly from standard SAP.
Materials receipt and consumption report
Total inventory summary Report
Pending Purchase order Status
Pending Purchase requisition Status
Purchasing Value Analysis
Pending non approved stock (identified as quality inspection stock)
Stock statement/Weekly / Monthly
Quotation analysis
Monthly stock of various items
Receipt of FG Weekly /Monthly (standard SAP material Document listing)
Vendor Evaluation Report

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9.List of ABAP Developments
9.1 Forms & Reports
The following reports and layouts are planned:
Material shortage report i.e. actual GRN quantity vs. BOE quantity or delivery challan
quantity
Exception Report for overdue quantity i.e. PO for which the delivery date has expired
and open quantity exists
Quotation comparison report with price break-up, payment terms, Inco terms
Outturn i.e. weight report captured at different stages
PO layout
Contract layout
PR status report along with RFQ no, PO no, Release details
Bonded BOE number against Ex bonded BOE number for STO
Stock out report for a period
GRN quantity Vs BOE quantity for a PO with 2% variation in quantity with ED and Ecess
values and the total PO quantity
Control chart report for time tracking for each activity
Returnable Gate Pass
Non Returnable Gate Pass
9.2 Data Migration Strategy
The following data will be programmatically transferred to SAP:
9.2.1 Master Data
Material Master
Vendor Master
Purchasing Info records
9.2.2 Balances
Inventory

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Dear Friends,
Based on Request from our friends... prepared SAP MM Business blue print document. Hope it
is useful for all. Thanks.

Regards,
G.V.Shivakkumar

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