From understanding the basics such as Goods Receiving, Stock Replenishment, and Inventory Management, to more advanced topics like Vendor Evaluation, Quality Management, and Warehouse Management, this article provides readers with an insight into the full potential of SAP Material Management (SAP MM).
And, whether you are just starting out learning about SAP MM or you are an experienced user, this article is sure to provide valuable information that can help you improve performance, engagement, and productivity across the board…
Read on to learn more about Material Management in SAP, as well as where our team of senior-level SAP consultants can fit in your organization.
What is SAP MM?
SAP MM (Material Management) is a module designed to help organizations with all things material management, procurement handling, and inventory management. It covers the procurement to payment process, from inventory to final invoice receipt and verification, and streamlines the procurement process to ensure the right materials are available when needed.
Capabilities Included in SAP MM
SAP MM plays a major role in managing inventory, including operations like…
- Ensuring materials are available in the right quantities at the right time and place
- Maintaining high inventory levels by minimizing deviations between planned and actual product amounts and results
- Managing materials and total supply chain effectively and cost-effectively
- Monitoring material management, warehouse management, material storage, and consumption-based planning processes
- Leverage comprehensive applications to manage material valuation, service management, physical inventory, and invoice verification
Key Features of SAP MM
MM in SAP supports and assists the entire procurement cycle by providing all the information relevant to purchase, including features that optimize material, purchasing, master data, inventory, and supply chain process management.
The MM module provides built-in integration capabilities that help connect Material Management activities to functions in other SAP applications, including…
- SAP Production Planning (PP)
- SAP Plant Maintenance (PM)
- SAP Sales and Distribution (SD)
- SAP Human Capital Management (HCM)
- SAP Quality Management (QM)
- SAP Project Systems (PS)
- SAP Warehouse Management (WM)
Sub-Components of SAP MM
SAP Material Management (SAP MM) is an important component of SAP ECC’s logistics functions as is used to manage the procurement and use of materials. SAP MM provides a complete suite of solutions intended to ensure the efficiency of business processes and facilitate more productive operations across the entire business system.
By understanding the core components of a MM workflow in SAP, companies can ensure their materials management processes are efficient and effective, leading to minimized costs, streamlined procurement activities, better decision making, and increased customer satisfaction.
The SAP Material Management module contains a few important sub-components to extend the functionality of the software across business units, including…
1) Master Data Management
Master Data is the core, non-transactional data used across an enterprise, including customers, products, supplier locations, and chart of accounts, used to run, manage, and optimize data management operations within a business enterprise.
In SAP MM, Master Data Management is used to maintain all the necessary information about materials and vendors, including types, descriptions, groups, and valuation standards for materials and codes, contacts, payment terms, and evaluation criteria for vendors.
2) Purchasing Management
Purchasing in SAP MM refers to the process of buying raw materials or services required to operate a business, including gathering product information, looking for vendors, evaluating vendors to compare performance and improve sourcing, creating purchasing documents, and processing invoices and payments across the organization.
The purchasing process includes the following steps to optimize the procurement process…
- Begin with a purchase request for a product or service.
- Create the purchase order.
- Outline a procurement request.
- Conduct release procedures for customers.
- Define requirements for the outline agreement.
- Share and sign contracts between vendors and customers.
- Determine shipping or pick-up timelines for the product or service.
The Purchasing component of SAP MM enables companies to determine possible suppliers, monitor supply and payment to vendors, create an Access Sequence, assign it to Condition Types, and create an outline agreement to ensure vendors are paid for the goods or services they have provided. With SAP MM Purchasing, organizations can ensure their purchasing and procurement activities are completed timely and efficiently across the board.
3) Inventory Management
Inventory Management is an important part of SAP MM, and it helps manage stock on a value or quantity basis, including planning, entry, and record keeping for all goods movements.
The primary activities involved in Inventory Management include…
- Handling external procurement activities
- Monitoring deliveries from vendors
- Tracking payments from customers to suppliers
- Facilitating communication between suppliers, vendors, and customers
- Managing consignment stocks and pipeline handling
- Supporting third-party processing and integrations
- Ensuring vendors are paid accurately for goods or services provided
The Inventory Management component of SAP MM helps to reduce material costs, labor costs, and market demands.
By understanding the features and processes of inventory management, businesses can optimize procurement and purchasing processes, reduce costs, improve decision-making processes, increase customer satisfaction, and make the most of their SAP investment.
4) Physical Inventory Management
Physical Inventory involves the process of verifying the actual inventory quantities of materials in stock and comparing them with the book balance (i.e., system stock) to ensure stocks are counted for each material in a physical inventory document and system stock is adjusted accordingly.
With Physical Inventory Management, companies are enabled to…
- Determine actual demand for materials to plan product counts more efficiently
- Reduce labor costs through optimized inventory management processes
- Identify discrepancies between physical stock and book balances to reduce the risk for inaccurate or excessive charges
- Ensure accurate accounting and financial reporting
- Connect and support material management activities (i.e., material requirement planning, vendor evaluation, invoice verification, etc.)
5) Material Valuation
Material Valuation in SAP MM is used to manage the price of materials by assigning a valuation class to a material via the material master record and using transaction code MR21 to change prices. It can be customized to meet the specific requirements of a company, and split valuation can be used to track material costs for different types of materials.
The main types of material inventory valuation include…
- LIFO, or “Last In, First Out” assumes that the most recent items purchased are used first in filling purchase requests and sales orders.
- FIFO, or “First In, First Out” assumes the oldest items purchased are used first to fill product orders for customers.
- Lowest Value determines the cost of inventory based on the lowest possible cost of items purchased by customers.
By understanding the different kinds of material valuation, the valuation activities associated with it, and the importance of material price and stock quantity, companies can effectively manage their materials in SAP MM. This helps to minimize the cost of materials, streamline the procurement process, and increase customer satisfaction across the board.
6) Service Management
Service Management is an important component of SAP MM as it involves managing services meant for direct consumption and creating service master records and purchase orders for external services.
A few key service management activities include…
- Creating service master records
- Outlining purchasing documents (i.e., service entry sheets)
- Managing and maintaining product and service quality
- Capturing actual costs of external services for invoice verification
- Supporting basic procurement processes (i.e., purchase orders, goods receipts, etc.)
Integrations between the Service Management module and other SAP applications like Sales and Distribution, Inventory Management, and Plant Management allow businesses to coordinate and manage the procurement of goods and services between departments and vendors and ensure smooth and efficient business operations.
7) Invoicing Verification
Invoicing verification is the last step in the procurement process and is used to verify the accuracy of incoming invoices, ensuring a company is not overcharged for the goods or services received.
The main activities covered in the Invoice Verification component include…
- Automatic invoice generation
- Configuration of setting to determine relevant document flow
- Invoice receipt from vendors
- Invoice entry by employees
- Data transfer to other modules (i.e., Financial Accounting)
- Manage cash flow across different areas of the organization
Invoice Verification helps to ensure that suppliers are paid for the goods or services they have provided, the company is not overcharged, and the goods or services are delivered on time to keep materials management and procurement processes efficient and effective.
Understanding the Procurement Process
The procurement process in SAP MM is a comprehensive and efficient way to manage supply chain operations and ensure the right materials are available at the right time. It includes activities such as the creation of purchase requisitions, selection of vendors, ordering of materials, receipt of goods and verification of invoices to improve communication and collaboration between suppliers, vendors, and customers.
Here are the main steps of the procurement process in SAP Material Management…
- First, the user identifies the material required and contacts the appropriate suppliers.
- User creates a purchase request, which is converted to a purchase order.
- Purchase order is sent to the vendor and goods are delivered to the company.
- Goods receipt is recorded and invoice is verified.
- Vendor delivers the product directly to the customer.
By understanding the procurement process in SAP MM (and seamless integration of all supply chain activities), businesses can ensure that their supply chain is managed efficiently and customer needs are met, no matter what.
Main Advantages of SAP MM
The SAP MM module is a vital component of the SAP Enterprise Resource Planning (ERP) system, providing businesses with the tools they need to manage their entire supply chain, track inventory, manage material requirements plans, improve business transactions allow them to stay competitive in the market.
Here are a few of the main advantages of the SAP Material Management module…
- Centralized Procurement: Provides a centralized procurement system that allows an organization to streamline its procurement processes and enables users to consolidate purchasing activities and leverage buying power to negotiate better prices and terms with suppliers.
- Improved Inventory Management: Efficiently manages inventory levels, monitors stock movements, and optimizes inventory to minimize stock-outs and overstocking and improve cost savings, cash flow, and customer service.
- Integration with Other SAP Modules: Integrates seamlessly with other SAP modules such as Sales and Distribution (SD), Production Planning (PP), and Financial Accounting (FI), allowing organizations to automate end-to-end business processes.
- Real-time Data: Provides real-time information on inventory levels, material requirements, and purchase orders to enable organizations to make timely and informed decisions.
- Better Supplier Management: Offers features such as vendor evaluation, supplier performance monitoring, and vendor scorecards to help organizations develop better relationships with suppliers and improve supplier quality.
How Can We Help?
Whether you need help implementing a new SAP ERP solution across your entire business enterprise, an extra hand navigating a complex scheduling agreement in SAP MM, or additional support managing the data flowing through your SAP MM system, Surety Systems is here to help.
Our team of senior-level SAP consultants has the technical skills and functional expertise needed to lead you to success, regardless of the complexity of your organizational structure or the nature of your SAP project needs.
And, even better, we’ve included a sample profile of one of our top-notch SAP consultants to give you a better idea of what to expect with our team…
Surety Senior SAP MM Consultant
- US Citizen
- 22+ years of SAP MM experience
- Specializes in SAP Materials Management and Inventory Management
- Deep understanding in SAP Procure-to-Pay (P2P) business processes and applications
- Completed 12+ Full Life Cycle Implementations
- Well-versed in SAP S/4HANA
- Direct prior experience working at SAP America
Getting Started with Us
Interested in learning more about our SAP consulting services? Ready to get started on a project with one of our top-notch SAP MM consultants?
Contact us today for more information!
Frequently Asked Questions
1) What is SAP MM?
SAP Materials Management (MM) is a module in SAP that helps manage the entire supply chain process. It enables companies to effectively plan, control and execute procurement activities, from consumption-based planning to invoice verification, and more.
2) What is SAP Material Management?
SAP MM (Materials Management) is an essential part of SAP ERP software and provides comprehensive tools to manage materials, inventory, warehouses, and procurement processes. It helps ensure a smooth supply chain from suppliers to manufacturers, as well as enabling customers to maintain sufficient stock to meet customer demand.
3) What is the MM module in SAP?
The MM module specializes in carrying out activities connected to procurement handling and inventory management, including goods and services procurement, vendor selection, invoice verification and more to ensure efficient business operations.