The process of buying material or service from a supplier is called Procurement. Some of the major procurement types are:
Purchase Requisition
Request for Quotation
Standard/Direct/Stock Material Procurement
Consumable/Indirect Material Procurement
Consignment Procurement
Subcontracting Procurement
Service Procurement
STO
Third Party Procurement
Outline Agreements (Contract/Scheduling Agreement)
Blanket PO
Asset PO
PO with advance Payment
PO with Retention Money
PO with free of charge Goods
PO with Invoicing Plan
Return PO
Automatic PO creation with PR
Automatic PO creation during GR
P2P Cycle
Purchas Requisition
Purchase requisition is an internal document.
A Purchase requisition can be created manually or automatically (through MRP).
A Purchase requisition can be converted into RFQ/Outline agreement/PO.
PR can be released at Header level (with classification) / Item level (without classification).
PR can be created with/without source.
The valuation price will be picked from the material master record.
If a source of supply is assigned to PR, during the PO creation the same source will be copied and it can be changed in PO.
Configuration
Create PR (ME51N/52N/53N)
Release PR (ME54/55)
Define Document type
Define Number ranges
Define screen layout at document level
Request for Quotation
RFQ is an external document
RFQ can be created with/without reference.
If Info update is set in the Quotations, then the conditions will be copied into Info record.
Quotation can be converted into Outline agreement/PO.
Collective number is used to identify the relevant quotations.
RFQ can be released at header level only.
Configuration
Create RFQ (ME41/42/43)
Approve RFQ (ME45)
Maintain Quotation (ME47)
Price comparison (ME49)
Define Document type
Define Number ranges
Define screen layout at document level
Note: During the price comparison if the prices are not found/unable to compare, then check if the vendor is assigned with calculation schema & check if the pricing procedure is maintained in condition type.
Direct/Standard/Stock Material Procurement
The direct material procurement process is used for stock material procurement.
Process
Create a PR- ME51N
(item category is standard)
Create a PO-ME21N
(with ref to PR)
Post Goods receipt-MIGO
(material & accounting docs will generate)
Post Invoice receipt-MIRO
(invoice & accounting docs will generate)
Accounting entries
Material with Moving average price (V)
During GR
Stock account (BSX) will debit & GR/IR account (WRX) will credit. If any change in the material price, then the same will be adjusted in the Stock account (BSX)
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Material with Standard price (S)
During GR
Stock account (BSX) will debit & GR/IR account (WRX) will credit. If any change in the material price, then the same will be adjusted in the Price difference account (PRD)
During IR
GR/IR account (WRX) will debit
Vendor account (KBS) will credit.
Configuration
Document type
Note
In case the quantity is distributed into different stock types (unrestricted, quality, blocked), then for each stock type the accounting entries posts separately.
If 103 mvt type is used then, only material doc will generate (stock will update), no accounting doc will generate. With 105, the stock can be released into unrestricted stock or with 124 the stock can be returned to vendor.
If 107 (valuated GR blocked stock) mvt type is used then, material and accounting docs will generate.
Indirect/Consumable Material Procurement
Indirect materials are consumable materials such as office supplies and spare parts. This procurement can be carried out without material or with material (UNBW & NLAG material types are allowed). This procurement is used to buy consumables for regular usage.
Process
Create a PR- ME51N
(item category is standard & account assignment category is K. with/without material is allowed, short text is mandatory)
Create a PO-ME21N
(with ref to PR)
Post Goods receipt-MIGO
(material & accounting docs will generate)
Post Invoice receipt-MIRO
(invoice & accounting docs will generate)
Accounting entries
Without Material
During GR
Consumption account (KBS) will debit& GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
With Material (UNBW-Non-valuated)
Only Material doc will generate.
With Material (NLAG-Non-stock)
Only Material doc will generate.
Configuration
Material type
Account assignment category
Document type
Material group
Note
While procuring without material short text, material group are mandatory.
While procuring with UNBW material type (Non-valuated), only stock will be updated and no value update will happen.
While procuring with NLAG material type (Non-stock), neither stock nor value update will happen.
Account assignment category is mandatory in all above scenarios.
GR can be set as valuated/Non-valuated.
In case GR-Non valuated is checked then, no accounting doc will generate.
Consignment Procurement
Consignment procurement takes place when you have an arrangement with a vendor that allows the vendor to keep its materials on your premises. When the material is issued to your production or stock, you must pay the vendor.
Pre-requisites
Consignment Info record must be maintained.
Maintain condition record KONS (MRM1)
Process
Create a PR- ME51N
(item category is K)
Create a PO-ME21N
(with ref to PR, the net price won’t appear in PO)
Post Goods receipt-MIGO 101K
(material doc will generate, but no accounting doc)
Transfer posting -MIGO
(withdraw stock from vendor consignment to own stock (411-k), material & accounting docs will generate)
Settle Consignment liabilities-MRKO
(invoice & accounting docs will generate)
Accounting entries
During Transfer Posting
Material with Moving average price (V)
Stock account (BSX)/Consumption account (GBB-VBR) will debit & Consignment payable account (KON) will credit.
During IR
Consignment payable account (KON) will debit & Vendor account (KBS) will credit.
Standard price (S)
Stock account (BSX)/Consumption account (GBB-VBR) will debit & Consignment payable account (KON) will credit. If change in the material price the same will be posted into Expense/Revenue from consignment material consumption account (AKO).
During IR
Consignment payable account (KON) will debit & Vendor account (KBS) will credit.
Configuration
Item category
Document type
Activate Info record for Consignment (OMEV)
Automatic settlement of consignment liabilities.
Note
Consignment stocks are managed at Storage location level.
Consignment stock is special stock.
Subcontracting Procurement
It involves an agreement where you issue raw materials to a vendor, and the vendor makes finished or semi-finished products from the raw materials. This procurement is used when the company doesn’t have the facility to assemble a product or manufacture a product.
Pre
Pre--requisitesrequisites
Production version
Special procurement key
BOM
Maintain the Vendor as Customer (for GST)
The Sales views must be maintained for all the materials.
Process
Create a PR- ME51N
(item category is L)
Create a PO-ME21N
(with ref to PR, BOM items will be displayed)
Transfer Posting-MIGO
(with ref to PO, mvt type 541. No material/accounting docs will generate)
Create Subcontracting Challan-J1IGSUBCON
(with ref to transfer posting doc)
Post Goods receipt-MIGO
(material & accounting docs will generate)
Reconcile Subcontracting challan
(with ref to GR document)
Post Invoice receipt-MIRO
(invoice & accounting docs will generate)
Post the Settlement (Subsequent adjustment)-MIGO
(used for under/over consumption)
Accounting entries
During GR
Raw material account (BSX) will credit. (100-)
Consumption account (GBB-VBO) will debit. (100+)
Subcontracting charges account (FRL) will debit. (50+)
GR/IR account (WRX) will credit. (50-)
FG/SFG account (BSX) will debit. (150+)
Change in stock account (BSV) will credit. (150-)
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit
Configuration
Item category
Document type
Define Shipping data for Plants
Define new billing document types
Note
A subsequent adjustment will be posted for under consumption (544) or over consumption (543).
If a Co-product is exists, then it should include in the BOM with (-) negative sign. During the GR, the Co-product is posted with 545.
Co-product means which comes along with the FG; By-product means which comes while making the FG (ex: scrap)
Service Procurement
procurement takes place when a company hires a vendor for external services, which are tasks carried out by an external contractor. This procurement is used to get any kind of services from the vendors (ex: office maintenance, software installation…etc.)
Process
Planned Delivery Services
Create PR-ME51N
(item category D, account assignment cat K, maintain service activity number, service group, GL account & cost center)
Create PO-ME21N
(with ref to PR, provide the account assignment category,)
Maintain Service entry sheet-ML81N
(with ref to PO, partial services are allowed. If GR is checked, then a material doc will be generated)
Post Invoice receipt-MIRO
Un-Planned Delivery Services
Create PR-ME51N
(item category D, account assignment cat K & short text and service group are mandatory)
Create PO-ME21N
(with ref to PR, maintain the limits and account assignment category)
Maintain Service entry sheet-ML81N
(with ref to PO, partial services are allowed. If GR is checked, then a material doc will be generated)
Post Invoice receipt-MIRO
Accounting Entries
During GR
Consumption account (KBS) will debit. GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit. Vendor account (KBS) will credit.
Configurations
Item category
Service group
Define number ranges for Service category
Define number ranges for Service entry sheet
Note
If GR non valuated is checked, then, only material doc will generate
If GR non valuated is unchecked, then, material and accounting docs will generate.
After creation of Un-planned service PO, during service entry sheet service activity number can also be given.
Lean Services
Process
Planned Lean Service
Create PR-ME51N
(with material number-material type SERV)
Create PO-ME21N
(with ref to PR, provide the account assignment category K)
Maintain Service entry sheet - (only through Fiori App)
(with ref to PO)
Post Invoice receipt-MIRO
Un-Planned Lean Service
Create PR-ME51N
(item category E, account assignment category K, service group and product type are mandatory)
Create PO-ME21N
(with ref to PR)
Maintain Service entry sheet - (only through Fiori App)
(with ref to PO)
Post Invoice receipt-MIRO
Configuration
Document type
Item category
Account assignment category
Stock Transport Order
This process is used to transfer the stock within the company.
Intra STO: between the Plants in the same company code.
Inter STO: between the Plants in two company codes.
Intra STO without delivery (351) (UB)
Intra STO with delivery 1-step (647+101) (UB)
Intra STO with delivery 2-steps (641 & 101) (UB)
Inter STO without delivery (351) (EUB)
Inter STO with delivery 1-step (645+101) (NB)
Inter STO with delivery 2-steps (643 & 101) (NB)
Pre requisites
Pre requisites
Supplying Plant must be created as a Vendor in receiving company code (for Inter STO).
Receiving Plant must be created as a Customer in supplying company code (for Inter STO).
Sales org data must be maintained to the supplying Plant (for Intra STO).
Customer must be assigned to the receiving Plant (for Intra STO).
Process
Intra STO without delivery
Create a PR-ME51N
(item category U)
Create a PO-ME21N
(doc type UB)
Post Goods Issue-MIGO
(with ref to PO, mvt type 351. Material & accounting docs will generate)
Post Goods Receipt-MIGO
(with ref to PO, no material/accounting docs will generate)
Accounting Entries
During GI
Standard Price:
Supplying plant stock account (BSX) will credit & Receiving plant stock account (BSX) will debit. If any change in material price, then the receiving plant price difference account (PRD) will debit/credit.
Moving Average Price:
Supplying plant stock account (BSX) will credit & Receiving plant stock account (BSX) will debit.
Intra STO with delivery (1step)
Create a PR-ME51N
(item category U)
Create a PO-ME21N
(doc type UB)
Create an Outbound delivery-VL10B
(with ref to PO)
Post Goods Issue-VL02N
(with ref to outbound delivery, mvt type 647 & 101. Material & accounting docs will generate)
Create Billing document-VF01
(with ref to outbound delivery)
Accounting Entries
During GI
Standard Price:
Supplying plant stock account (BSX) will credit & Receiving plant stock account (BSX) will debit. If any change in material price, the receiving plant price difference account (PRD) will debit/credit.
Moving Average Price:
Supplying plant stock account (BSX) will credit & Receiving plant stock account (BSX) will debit.
Intra STO with delivery (2steps)
Create a PR-ME51N
(item category U)
Create a PO-ME21N
(doc type UB)
Create an Outbound delivery-VL10B
(with ref to PO)
Post Goods Issue-VL02N
(with ref to outbound delivery, mvt type 641. Material & accounting docs will generate)
Create Billing document-VF01
(with ref to outbound delivery)
Post Goods Receipt-MIGO
(with ref to outbound delivery)
Accounting Entries
During GI
Standard Price:
Supplying plant stock account (BSX) will credit & Receiving plant stock account (BSX) will debit. If any change in material price, the receiving plant price difference account (PRD) will debit/credit.
Moving Average Price:
Supplying plant stock account (BSX) will credit & Receiving plant stock account (BSX) will debit.
Inter STO without delivery
Create a PR-ME51N
(item category U)
Create a PO-ME21N
(doc type EUB)
Post Goods Issue-MIGO
(with ref to PO, mvt type 351. Material & accounting docs will generate)
Post Goods Receipt-MIGO
(with ref to PO, material & accounting docs will generate)
Accounting Entries
During GI (Supplying Plant)
Stock account (BSX) will credit & Cost of goods sold account (GBB-VAY) will debit.
During GR (Receiving Plant)
Stock account (BSX) will debit & GR/IR account (WRX) will credit.
During IR (Receiving Plant)
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Inter STO with delivery (1step)
Create a PR-ME51N
(item category Standard)
Create a PO-ME21N
(doc type NB)
Create an Outbound delivery-VL10B
(with ref to PO)
Post Goods Issue-VL02N
(with ref to outbound delivery, mvt type 645 & 101. Material & accounting docs will generate)
Create Billing document-VF01
(with ref to outbound delivery)
Post Invoice-MIRO
Accounting Entries
During GI (Supplying Plant)
Stock account (BSX) will credit & Cost of goods sold account (GBB-VAY) will debit.
During GR (Receiving Plant)
Stock account (BSX) will debit & GR/IR account (WRX) will credit.
During IR (Receiving Plant)
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Inter STO with delivery (2steps)
Create a PR-ME51N
(item category Standard)
Create a PO-ME21N
(doc type NB)
Create an Outbound delivery-VL10B
(with ref to PO)
Post Goods Issue-VL02N
(with ref to outbound delivery, mvt type 643. Material & accounting docs will generate)
Create Billing document-VF01
(with ref to outbound delivery)
Post Goods Receipt-MIGO
(with ref to outbound delivery)
Post Invoice-MIRO
Accounting Entries
During GI (Supplying Plant)
Stock account (BSX) will credit & Cost of goods sold account (GBB-VAY) will debit.
During GR (Receiving Plant)
Stock account (BSX) will debit & GR/IR account (WRX) will credit.
During IR (Receiving Plant)
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Configuration
Create supplying plant as vendor.
Define Shipping data for Plants
Define checking rule
Assign delivery types and checking rules
Assign document types, one step procedure and under delivery tolerance.
Note
Intra: delivery type NL + checking rule B
Inter: delivery type NLCC + checking rule RP
In STO, the price is always pick from the supplying plant material master record.
Third Party Procurement
Third-party procurement takes place when you order goods from a vendor, and the vendor ships the goods to a third party (usually your customer or subcontract vendor).
Process
Third Party Procurement for Subcontractor
Create a PR-ME51N
Create a PO-ME21N
(item details-under delivery address tab provide SC vendor)
Post Goods Receipt-MIGO
(with ref to PO, mvt type 101-O)
Post Invoice Receipt-MIRO
Accounting Entries
During GR
Stock account (BSX) will debit & GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Third Party Procurement for Customer
Create a Sales order- VA01
(the PR will be created automatically during the sales order creation)
Create a PO- ME21N
(with ref to PO, item details-under delivery address tab system picks the customer, sales order, account assignment cat X, item category S automatically)
Post Goods Receipt- MIGO
(with ref to PO. Material and accounting docs will generate)
Post Billing document- VF01
Post Invoice Receipt- MIRO
Accounting Entries
During GR
Cost of goods sold account (GBB-VAX) will debit & GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Configuration
Document type
Item category
Account assignment category
Note
While procuring for customer, during the GR the stock quantity won’t update.
Outline Agreements
An outline agreement is a longer-term purchase arrangement with a vendor. It concerns the supply of materials or the performance of services according to predetermined conditions.
Contract
Quantity Contract (MK)
(This contract is based on quantity and is fulfilled when the total agreed-upon quantity is supplied by the vendor)
Value Contract (WK)
(This contract is based on total value and is fulfilled when the total agreed-upon value is supplied by the vendor)
Scheduling Agreement
LP (without Release documentation)
LPA (with Release documentation)
o JIT
(Just-in-time (JIT) delivery schedules are used to inform your vendor of a near-future requirements)
o FRC
(Forecast (FRC) delivery schedules are used to give the vendor a medium-term overview of your requirement)
Contract
Contract agreements are outline agreements with a vendor concerning the supply of material or performance of services. They don’t contain details of the delivery dates for each of the items. Rather, delivery dates are imposed on the vendor via release orders.
Contracts can be created manually, with reference to other contracts, purchase requisitions, and RFQs.
Contracts can be created for a plant or for multiple plants belonging to the same purchasing organization. This is known as a centrally agreed contract.
Item category M can be used for quantity & value contracts. Item category W is only used for value contracts.
Process
Create Contract-ME31K
(if quantity contract, then provide the total quantity. if value contract, then provide the total value)
Create a PO/Release Order-ME21N
(with ref to Contract)
Post Goods Receipt-MIGO
(with ref to PO. Material & accounting docs will generate)
Post Invoice Receipt-MIRO
Accounting Entries
During GR
Stock account (BSX) will debit & GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Configuration
Document type
Activate direct invoice posting for contract
Note
To post the direct invoice with ref to contract, activate the LOG_MM_CI_3 business function.
Scheduling Agreement
A scheduling agreement is an outline agreement where a vendor supplies the materials according to predetermined conditions.
Pre-requisites
Set JIT indicator in Material master.
Assign creation profile to vendor master.
Process
LP (without Release documentation)
Create Scheduling Agreement-ME31L
Maintain delivery schedule-ME38
Post Goods Receipt-MIGO
(with ref to scheduling agreement. Material & accounting docs will generate)
Post Invoice Receipt-MIRO
Accounting Entries
During GR
Stock account (BSX) will debit & GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
LPA (with Release documentation)
Create Scheduling Agreement-ME31L
Maintain delivery schedule-ME38
Release Schedule lines-ME84
(we can release the FRC/JIT schedule lines)
Post Goods Receipt-MIGO
(with ref to scheduling agreement. Material & accounting docs will generate)
Post Invoice Receipt-MIRO
Accounting Entries
During GR
Stock account (BSX) will debit & GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit & Vendor account (KBS) will credit.
Configuration
Document type
Creation Profile
Blanket PO
Blanket POs are often appropriate for low-value materials and are used to procure consumable materials and services that are frequently ordered from the same supplier. Blanket POs are valid for a longer term such as for a year or two and with a value limit.
A goods receipt isn’t required.
Material master records aren’t required.
Process
Create a PR-ME51N
(doc type FO, item category B, account assignment cat K, material group, limits)
Create PO-ME21N
(with ref to PR, validity period)
Post Invoice-MIRO
(click on account assignment in line item and provide the amount)
Accounting Entries
During IR
Consumption account (KBS) will debit. Vendor account (KBS) will credit.
Configuration
Document type
Item category
Tolerance limits
Asset Procurement
Asset procurement includes purchasing of Fixed Assets which are subjected to Depreciation Accounting. This procurement is used to buy the Assets.
Process
Create a PR- ME51N
(account assignment cat A, material is optional)
Create a PO- ME21N
(with ref to PR)
Post Goods Receipt- MIGO
Post Invoice Receipt- MIRO
Asset Capitalization- AS02
Accounting Entries
During IR
Technical clearing account (ANL) will debit. Vendor account (KBS) will credit.
Configuration
Account assignment category
Asset master
PO with advance Payment
This process is used to make the advance payments to the vendor.
Process
Create a PR- ME51N
Create PO- ME21N
(with ref to PR, down payment category)
Create Down payment request- F-47
Post Down payment request- F-48
Post Goods Receipt- MIGO
Post Invoice Receipt- MIRO
Clear the Down payment- F-53
Accounting Entries
During GR
Stock account (BSX) will debit. GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit. Vendor account (KBS) will credit.
Configuration
Enable the Business function LOG_MMFI_P2P
Note
During the payment, the vendor payment will be done by deducting down payment amount.
PO with Retention Money
This process is used if the company wants to keep some money during the payment to vendor. After the guaranty/Warranty period is over.
Process
Create a PR- ME51N
Create PO- ME21N
(with ref to PR, select the Retention amount/%)
Post Goods Receipt- MIGO
Post Invoice Receipt
Accounting Entries
During GR
Stock account (BSX) will debit. GR/IR account (WRX) will credit.
During IR
GR/IR account (WRX) will debit. Vendor account (KBS) will credit.
Retention
Vendor account (KBS) will debit. Vendor Retention account (EGX) will credit.
Configuration
Enable the Business function LOG_MMFI_P2P
PO with free of charge Goods
This process is used when the vendor is giving you the goods at free of cost/sample products.
Process
Create PO- ME21N
(check free goods check box)
Post Goods Receipt- MIGO
Accounting Entries
Only material doc will create. Stock will update, but not value.
Accounting doc will create with BSX & OSI transaction keys (with 0 values).
PO with Invoicing Plan
This process is used to enable the automatic invoice raise by periodically/partially,
Process
Periodic Invoicing Plan
Create PO- ME21N
(doc type FB, account assg cat K, validity, uncheck GR based IV, select invoicing plan, check GR non valuated)
Post Goods Receipt- MIGO
Execute Invoice Settlement- MRIS
Accounting Entries
During IR
Consumption account (KBS) will debit.
Vendor account (KBS) will credit.
Partial Invoicing Plan
Create PO- ME21N
(doc type FB, account assg cat K, validity, uncheck GR based IV, select invoicing plan, check GR non valuated)
Post Goods Receipt- MIGO
Execute Invoice Settlement- MRIS
Accounting Entries
During IR
Consumption account (KBS) will debit.
Vendor account (KBS) will credit.
Configuration
Document type
Invoicing Plan type
Return PO
This process is used to return the goods to the vendor which are in good condition.
Process
Return PO with Delivery
Create PO- ME21N
(check the return check box)
Create Delivery- VL10B
(with ref to PO)
Post Goods Issue- VL02N
(with ref to delivery mvt type 161)
Post Credit Memo- MIRO
Accounting Entries
During GI
Stock account (BSX) will credit. GR/IR account (WRX) will debit.
During Credit Memo
GR/IR account (WRX) will credit. Vendor account (KBS) will debit.
Return PO without Delivery
Create PO- ME21N
(check the return check box)
Post Goods Issue- MIGO
(with ref to PO, mvt type 161)
Post Credit Memo- MIRO
Accounting Entries
During GI
Stock account (BSX) will credit. GR/IR account (WRX) will debit.
During Credit Memo
GR/IR account (WRX) will credit. Vendor account (KBS) will debit.
Configuration
Document type
Returns order type
Automatic PO creation with PR
This process is used to convert the PR’s into PO’s automatically.
Pre requisites
Enable the Auto PO in Material master
Enable the Auto PO in Vendor master
Maintain the Source list
Maintain the Info record
Define default doc type for PR to PO
Link PR doc type to PO doc type
Process
Create a PR- ME51N
Execute Auto PO creation- ME59N
Note
Only one default doc type can be maintained to convert PR to PO
In-case of STO, the default doc type maintained along with Supplying Plant and Receiving Plant combination.
Automatic PO creation during GR
This process is used when a vendor sends the goods without prior PO. If the company accepts to take the goods then during the GR an automatic PO can be generated, if required.
Pre requisites
Enable the Auto PO in Material master.
Enable the Auto PO in Vendor master.
Maintain the Source list.
Maintain the Info record.
Activate the automatic PO generation check box for movement type.
Assign Standard Purchasing organization to Plant.
Process
Post the Goods Receipt
(with ref doc as PO, select the Non ordered item)
Note
During the posting if system throws an error saying ‘Enter a vendor’, then change the M7-018 message as warning.
Author: Senthilkumar T
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