Over and Under Consumption along with all Movement types in SAP MM

Over and Under Consumption along with all Movement types in SAP MM:

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Concept:

As we all know, when we order for a finished product with subcontracting order. We need to send the stock to the vendor, or we need to procure from the same vendor.

Let’s think we have sent the stock to vendor through MB1B- 541 movement, now vendor should prepare the final product with your child materials.

The overview of concept explains vendor consumption for subcontracting (More/less), all queries will be related to this only.

Example: Under Consumption: 

let’s take a simple example, we have ordered the final product as shirt and for that we have sent the cloth and thread for making the final product, let see -we have sent cloth of 100 pieces and for making 100 shirts and we sent 100 KG of thread. Now the vendor made 100 shirts with 100 clothes, but he used only 90 kg of thread. Here 10 KG of thread is under consumption.

Step1: Now we post the MIGO 101 for the received goods.

Subcontracting PO- 100 shirts (Post fully), Now check for the remaining materials which are over/under consumed by the vendor. As per our scenario vendor used only 90 kg of thread, Now check how to post for remaining 10kg of thread and how to take back from vendor.

Step2: 

Now we need to make sure that subsequent posting has been done in MIGO-Subsequent adjustment and select the PO and line item, once you enter the subcontracting PO, the line items will be shown in the item overview along with the child materials.

Select the material and make 10 kg in quantity and check the under consumption (In this case we have under consumption) and post the subsequent adjustment.

Now go to MB1B and select the movement type 542, and post for the 10 KG of quantity to bring back the stock of 10 kg from vendor.

Example: Over Consumption:

let’s think we have ordered 100 shirts in subcontracting order by entering components as 100 cloth and 100 kg thread, now vendor has been delivered 95 shirts by consuming 100 cloth and 100 kg thread and for extra 5 shirts we need to send the material to vendor and it can be considered as Over consumption.

We need to follow the same process as I mentioned above, up to MIGO you can follow and next you can check below.

Go to MIGO- Subsequent Adjustment- PO number-Execute

Select the child material which is over consumption and maintain the value of 10 KG

Check the option Over consumption.

Go to MB1B- 541 Movement

Transfer the 10 clothes and 10 KG threads and post.

Even in this quantity if there is over and under consumption follow the same process, please focus on the quantity and logical, so that we can post in MIGO- Subsequent correctly.

Movement Types in SAP MM series Wise:

1XX-Series:

Note: Anything cancellation will be 1+(E.g.: for 101 cancellation is 101+1=102)

101- Posting goods receipt for the purchase order, when we receive goods normally from the vendor.

102-Cancellation for 101, we need to cancel the movement type fully and repost if any changes required.

103-Posting goods receipt of PO into GR Blocked stock, GR blocked stock means when we receive the excess quantity from supplier, we can move to GR blocked stock and make decision after on this.

104- cancellation of GR blocked stock.

105-release of GR blocked stock to unrestricted stock, directly it will post to unrestricted when we use movement 105.

121- Subsequent adjustment for the subcontracting stock, over consumption and under consumption.

122- return delivery posting

123-cancellation of return delivery posting.

124-Return delivery to vendor from GR blocked stock

125-cancellation of return delivery to vendor from GR blocked stock

161-return purchase order to vendor

2XX-Series:

We can perform in MB1A

We will use these 2 series movement for issuing goods

201- Goods issue for the cost center

221-Goods issue for Project

251-Goods issue for sale

261-Goods issue for production order

281-Goods issue for Network

291-Goods issue for Account Assignment

3XX-Series:

301- Transfer posting from plant to plant in one step

302-cancellation of transfer posting for 301.

303-transfer posting from plant to plant in 2 steps-In this case material will be moved to plant stock and not directly to transfer plant stock

304-cancellation of 303

305-we can get the 303-material moved to plant by using movement 305

309- Transfer posting from Material to material

311- transfer of storage location to other storage location one step

312-cancellation

313-transfer of storage location to other storage location two step

314-cancellation

315-Put away the stock from 313

321- Quality inspection stock to unrestricted

322-unrestricted to Quality inspection stock

349-Blocked stock to Quality inspection

350- Quality inspection to Blocked stock

343-Blocked stock to unrestricted stock

344- unrestricted stock to Blocked

331-sample from Quality inspection

333- sample from unrestricted stock

335- sample from Blocked stock

We can process all the above movement types by using T-code MB1B

We can view all this stock transfers in MB51, all material movement with Quantity.

MB51- Material -plant

History of that material in the plant X, report will be generated accordingly to know the exact stock present in the plant.

4XX- Series

411- Transfer of special stock to Unrestricted Stock

               We have special stocks like consignment, where once GR is posted for Consignment PO stock will be moved to vendor consignment stock

Once we receive to vendor consignment stock, then we need to move to our own stock, with movement type 411 K

412- cancellation of 411-K

413- Transfer posting to sales order stock

451-returns from customer

453-transfer of blocked stock returns to unrestricted use stock

455- returns stock transfer

457-transfer of blocked stock returns to quality inspection stock

459-transfer of blocked stock returns to blocked stock

5XX Series

501- Goods receipt without p.order to unrestricted stock

503- Goods receipt without p.order to quality inspection stock

505- Goods receipt without p.order to blocked stock

521-Goods receipt without order to unrestricted stock

523- Goods receipt without order to quality inspection stock

525- Goods receipt without order to blocked stock

541- Transfer of unrestricted use stock to subcontracting stock

543-consumption by sub-contracting vendor

545-by product (Scrap)

551-unrecericted stock to scrap

553- quality inspection stock to scrap

555-blocked stock to scrap

561-Initial entry to unrestricted use

563-Initial entry to Quality inspection stock

565-nitial entry to blocked stock

6XX-Series

601- Goods issue for delivery

603- Goods issue for STO with additional item.

605- Goods receipt for STO

641- Goods issue for STO

7XX Series

701- Inventory difference in unrestricted use stock

703- Inventory difference in Quality inspection stock

707- Inventory difference in blocked stock

711- Inventory difference in unrestricted use stock-LE WM

713- Inventory difference in Quality inspection stock MM-IM

715- Inventory difference for returns

717- Inventory difference in blocked stock LE WM

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Contract Management and Scheduled Agreements- SAP MM

Contract Management and Scheduled Agreements:

For Videos Explanation, please go to YouTube and Subscribe -  Studyuuu  SAPMM

Concept: 

Contract is the word we use normally for different scenarios in real life, but coming to procurement contract management will be agreement between the vendor and the client(ordering party), they may have different purposes but one thing common is Contract to maintain their business up to the mark or else they need to struggle on daily basis to see the production things manually and its very risky.

***It’s a legal agreement between the vendor and client***

Importance of Contract: 

Every company they have contract but the main importance for maintaining contract is fallows.

·        Price negotiations

·        Supplier relationships

·        Lead time management

·        Payment terms

·        TAT

Example for understanding:

Without Contract:

Let’s think you have a company where you see the production activity(TV Spare parts Company) and every time you need to order the material from vendor when there is a requirement and your company is growing big and you have more production(produce more TV’s for sales), even in this case you need to order the material whenever is required and here there is no confirmation that vendor can deliver those within time, he may take his sweet time for delivery because your orders are spot(whenever required) and even the price is also same for everyone in market.

With Contract:

Let’s think you hold a big company as above example and you have a contract with vendor for those required materials, when ever the production is increased(I mean sales) then you can place the order with contract(No need to contact any distributor), once the order is placed vendor is having agreed lead time like 2 days, where he should deliver within the time or else vendor may get fine around 20-30%, even the price and payment terms also will be favor to you and production will be done very smoothly.

Creation of contract and their requirements in SAP:

When we will create contract: 

when there is a requirement of large production that you observed in your company, then you can recommend maintaining the contract with vendor for saving money, time, and to maintain relationship (Supplier relationship).

Requirements:

Each company have their own requirements to create contract and here I will explain the basic methods to follow the requirements/rules.

        1. Sign- Off (Vendor Approval form)

2. Proposal for contract to create (Always from Stakeholders/Clients)

3. Form with vendor details (Company Specific)

4. Price, Net terms, Material, vendor, payment terms, Contract period

Step 1: Sign-Off Process:

Almost every company fallows the signoff process, which explains about agreed terms and condition from the vendor side and client side.

The document contains the information like Statement of work details and Quality/Quantity details, Payment terms and any violations from vendor side/client side.

All this information will be available in the signoff documents and both the parties needs to sign in the document and once this done step 2.

Step 2: Maintaining vendor in Approved vendor list for the company:

Once the signoff process is done the QAC team should get the details of the vendor and he can maintain those vendors in there approved vendor list and each company will be having there customized T-codes to save this data in SAP and contract management team can access those T-codes and get the information of the vendor has been approved vendor list or Not.

Basically, Quality management team will be updating this data in SAP, each plant will be having once QAC team for quality checkup.

Once the step 2 is completed we can go ahead with step 3.

Step 3: Getting details from Sourcing/Stakeholder:

Once we have above details, we can ask more details from sourcing like price, pay terms, MOQ, Total value of contract, Partner Functions, total Quantity of contract, Approvers, any other material texts that needs to maintain in contract.

Once we get all the details with form, then we can process further.

Step 4: Contract creation:

First thing we need to consider is, whether your company is fallowing value-based contract or Quantity based contract.

Value based: the total value of contract will be provided to buyer to update in contract, such that we can access only to that value in that period of time for that contract to procure from that vendor and for additional value we need to go for access.

Quantity based: same as value based, here we must go with Quantity, and we cannot order more than that quantity in that period for contract and if requires more we need to go for access.

Step 5:

Now start creating the contract in ME31K

Input the vendor -Agreement type

ZDMK- Quantity based

ZDWK-value based

Others- Mention as required like services, Cost center

Purchase organization

Purchase group

Enter

Step 6:

Now we need to enter the header details for the contract

Validity start/End

Payment terms

If it is value-based contract-Enter total value

Incoterms

Step 7:

Here we go with item overview screen- where we need to maintain the material that we are going to order in future from this vendor.

Material

Target Quantity-overall quantity if required

UOM

Price/Net

Plant/Sto Location

Enter

Step 8

Now maintain the partners where all orders from this contract will have the same details as you are maintaining in contract and even the partners also.

Maintain the partners OA,GS,PI,Z5 and few are as per your company rules.

Click on couples’ symbol in the above picture to go to Partners

Step 9:

Item details- maintain the tax code and remaining required information.

Step 10:

Maintain the output printout- such that every order will reach to supplier directly

Explanation-Important:

·        Here we have done with contract creation, now every month we will receive the updates for the contract like changing the prices for the material contract, Payment terms, Etc

·        We can maintain N number of materials in one contract but only one vendor and we can use N number of plants also.

·        We have only one purchase organization in one contract, so that plant belongs to that purchase organization we should maintain, or else system will through error.

·        Once we have contract, company will negotiate with vendor for price decrement every monthly or Quarterly or half early.

·        Once the requester creates the PR with respect to contract, the PO will generate automatically within 30 seconds and if there is any error Batch report will be generated to resolve the issues.

Scheduled Agreements:

Scheduled agreements have the same concept as contract, whereas here we need to give the       scheduled specific dates to vendor that we are going to order the material.

Every company will prefer to go to contract, because we can order the material whenever its required.

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Sub-Contracting process with Scrap and Few more Examples- SAP MM

Sub-Contracting process with Scrap and Few more Examples

Concept:

To work on all these assembly parts/Extra accessories, we need manufacturing unit where we can do all this assembly but its costly and time taking for the preparation and we may have some quality issues, by keeping all this in mind every company would like to go for Sub-contracting process- Which means

Certain companies which will be outsourcing (Giving products to other companies), where they use to work only on this assembly with best quality and take the price for only service.

Examples:

Few of the scenarios with explanation.

1     We have 3 child materials and we need the Parent Material (final product), but we will not assemble or manufacture any tools but for the production/sales requirements we need the final product to be assembled.

we will take the 3 child materials from 3 different vendors and we will maintain a BOM with parent material, after that creating subcontracting order for parent material (BOM will be taken automatically with child materials in components).

Do the GR for all 3 materials, and do the transfer posting for all child materials to vendor through MB1B or ME2O

Now do GR for subcontracting vendor, where you can see movement types 101 and 543.

Child materials

1.      L-shaped metallic plate

2.      Spring

3.      Bolts for fitting

Parent Materials

1.      Metallic plate with full furnished.

Implementing:

·        First, we need to procure the materials which are required to prepare the parent material, here we need to procure L-shaped metallic plate, Spring, Bolts for fitting from the respective vendor.

·        We can create 1 PR, with 3 lines mentioning 3 materials in each line individually with respective vendors or same vendor (based on your requirements)

·        Create PO for above 3 materials and as per the respective quantity and do the MIGO (Goods receipt), so that stock will be stored in the plant premises.

·        Complete all 3 material MIGO as mentioned above

·        Now create a BOM for the parent material, so here BOM is very important for all Parent materials.

·        CS01-Create BOM

·        Enter parent material following with all child materials inside

We are maintaining BOM for-what are the components that required to create a one complete parent material.

·        Now create New PO with Item category L-mention the parent material number, so that automatically child materials will go to Material Data-Components (BOM -we maintained)

·        Now in components we have 3 materials (Child)

·        Al the 3 child materials will go to sub-contract vendor for assembly, to send those materials to vendor we need to perform the movement type.

·        MB1B-stock transfer- we need to transfer the stock of all 3 materials to vendor stock by using the movement type 541,

·        Once the stock is transferred, we can see those stock in MMBE-stock under vendor.

·        Now vendor will deliver the assembled goods to plant and we need to perform the MIGO

·        Perform the MIGO with 101- now the stock should be available in MMBE for parent material

·        Remaining child materials quantity will be 0

     Vendor to vendor material shifting through Subcontracting process:

Scenario: 

We need a parent material which will get from subcontracting vendor and child material from another vendor, the child vendor should send the material directly to subcontracting vendor.

Eg: we would like to order a cell phone battery from child vendor, and he will directly send that battery to subcontracting vendor and subcontracting vendor will deliver the fully furnished phone. We need this to be implement in the SAP.

Step 1: Create a normal PO with cell phone battery and go to the delivery address tab in PO, here you can find SC vendor, check the SC vendor and mention the vendor number in the vendor field.

o   So that SAP will pick the delivery address as vendor address automatically.

o   Now the child vendor will deliver the cell phone battery directly to subcontracting vendor (to view this action in SAP, follow below)

o   Now post the GR for the child material PO, MIGO and mention the PO number and date.

o   Enter the quantity, system will not ask for storage location and tick OK and post the GR.

o   Now check in MMBE (Stock Overview), you can see the material is maintained with vendor.

Step 2:

Now create subcontracting PO for the parent material (Phone) with item category L, as we maintained BOM the components will be taken automatically (Child materials) and delivery address to plant in the PO.

Now process for GR for the parent material and maintain the quantity.

If required explore the parent material with + icon and you can see the child materials maintained with movement type 543.

§  541- Sending the material to the subcontracting vendor stock.

§  543-Consumption of material which is delivered to subcontracting vendor.

§  545-scrap material while consumption or vendor material used for the parent material.

Ordering Material and scrap from the subcontracting vendor:

Subcontracting material with scrap.

As we know when the material is manufactured by the vendor, scrap will generate automatically and few of the scraps will be costly or needs to be moved to plant scrap process, so in this case we need to implement such that vendor should provide the parent material along with the scrap.

E.g.: we are ordering a material of sofa; we procure wood from one vendor to plant and will move that material to subcontracting vendor through 541 and will order a subcontracting order along with scrap.

Step1:

o   Create a normal PO for procuring the wood from the vendor and once we receive that wood to plant(warehouse), we can follow the remaining process as mentioned below.

o   Maintain BOM for parent material, while maintaining we will update child materials with specific quantities, basically it will multiply with PO quantity. So, maintain accordingly.

o   Here for scrap, we are taking the scrap from vendor which are consumed for the child materials. If we want that material to plant, we need to create a new material with the name “Scrap” and maintain in BOM as 1- and save the BOM.

·        Meanwhile create a subcontracting PO with parent material with item category L, where BOM will be taken automatically with 1- quantity and child materials.

·        Now do the goods transfer in MB1B with movement 541, so that stock in the warehouse move to vendor stock and now the subcontracting vendor will perform the manufacturing process of sofa.

·        He will create the sofas as per the quantity and delivers the goods to plant along with scrap.

·        Now do the MIGO with 101 movement and post the sofas quantity and click on + icon in parent material, you will see the child materials with scrap.

·        Child materials – means consumed and will be used for sofas.

·        Scrap+ means waste generated and needs to bring to plant as per the PO.

Now go to MB1B and mention the movement 542, bring back the scrap to plant (SAP stock overview)

Final: if we are procuring one material with subcontracting vendor, we need to go with 3^rd example, where we need to process the BOM with -quantity instead of scrap we need to post procuring extra material number.

No need to do 542 movement, where this will be consumed for the parent material.

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