Revolution: 4. Materials Management

4 Materials
Management
REVOLUTION
Existing Business Process and Business Requirement from
SUNSTAR OVERSEAS LTD.
SAP Business Process for SUNSTAR OVERSEAS LTD.
(Implementation of mySAP ECC 5.0 by Coconut Software For Sunstar Overseas Limited
Sign-off on Business Blue Print on
4. Materials Management
(GO LIVE on 3rd July, 2006)
Mr. Rakesh Aggarwal

Project Sponsor
Mr. Rohit Aggarwal Mr. Sanjay Aggarwal Mr. Gopal Krishna Mr. Harish K Mr. Mohit Wadera
Steering Committee Member, Steering Committee Steering Committee Steering Committee Steering Committee
Sunstar Member, Sunstar Member, Coconut Member, Coconut Member, Coconut
Mr. Rajneesh Sharma Mr. Vivek Saluja

Project Manager, Sunstar Project Manager, Coconut
Mr. Jai Khurana Mr. Sanjeev Grover Mr. Gaurav Shukla Mr. Dinesh Ahuja
Consultant, Coconut Module Owner, Sunstar Module Owner, Sunstar Team Member, Sunstar
Business Blue Print – Materials Management – Mr. Sanjeev Grover/ Mr. Jai Khurana – Coconut Software Pvt. Ltd. Page 1 of 68
4 Materials Existing Business Process and Business Requirement from
Management SUNSTAR OVERSEAS LTD.
Introduction
This Business Blue Print Document describes the following:
• Enterprise Structure of SUNSTAR OVERSEAS LTD.
• Business requirements as given by the SUNSTAR OVERSEAS LTD Key Users
• Suggestions by Coconut consultants wherever are found to be useful to SUNSTAR OVERSEAS LTD’s business functionality
• Comments whether the requirement can be realized on the mYSAP ECC partly for the system or not.
The following codes are given to each module that is within the scope of the agreement:
Module
Module
ID
1 Financial Accounting
2 Controlling
3 Sales and Distribution
4 Materials Management
5 Production and Planning
6 Quality Management
Further processes, sub-process and activities in each module are denoted by, say. 4.1, 4.1.1, 4.2.1 etc.
A Business Blueprint document is prepared for each module and reference shall be made wherever required to other modules,
whenever there is an overlap of business processes across modules or a business process requires to be completed in more than
one module. The reference to the business process shall be made using the process ID numbers as described below;
For e.g.:
As per the above notation, All processes in Material Management start with 4.*… So if a reference has to be made to process in
Goods receipt, then the reference is made using the notation say, 4.4.*… where ‘4’ refers to Goods receipt and *.4.3 refers to GRN
due to stock transfers.
Step 1:
The Module Owner shall identify various existing business processes at a broad level and make a list of them as described under
section 1 of this document.
Step 2:
Depending upon the various business processes thus identified in Step 1, various business scenario are described in the following
way:
Existing Business Processes: The current way of executing the business process shall be explained in detail with data/information
flow along with the IT systems / Manual Systems being used in the whole cycle.
Business Requirement: Under this head, the module owner shall describe the requirements of the company vis-à-vis this business
scenario, if necessary with examples. Following situations can arise:
(a) The current provisions in the system are sufficient enough and additional configuration efforts are not required.
(b) The current provisions are not sufficient and satisfactory and additional features need to be incorporated in the system
(c) There is no current provision to handle this transaction at all.
The module owner shall identify each business scenario with the above classification.
Step 3:
Based on the Business Requirement, Coconut consultant shall do a detailed Requirement Analysis and based on the analysis,
shall propose the best fit business process on the mYSAP ECC for the system.
It may not be possible to decide the realization possibility of all Business requirements on the mYSAP ECC for the system
immediately and hence the following legend is being followed for describing the statuses:
The SAP Business Process for SUNSTAR OVERSEAS LTD is dependent on the following aspects:
 Scope of services described in the Software Services Agreement signed by M/s. SUNSTAR OVERSEAS LTD. and M/s.
COCONUT.
 Scope of functionality described in the Software Services Agreement mentioned above.
 Capabilities and Limitations of mYSAP ECC for the system.
 Existing Business Knowledge Transfer from SUNSTAR OVERSEAS LTD. Project Team members.
 Business Requirements defined by the SUNSTAR OVERSEAS LTD. Project Team members.
SUNSTAR OVERSEAS LTD. accepts that the decision to accept the “SAP Business Process for SUNSTAR OVERSEAS LTD” is
completely it’s own and not influenced by Coconut. Coconut shall not be responsible for the business consequences on SUNSTAR
OVERSEAS LTD. after the realization and usage of the processes being suggested here.
SUNSTAR OVERSEAS LTD. shall indemnify Coconut from all responsibilities for any other business consequences during the
framing of the SAP Business Process for SUNSTAR, or at any time during or after the realization / implementation of these
processes on mYSAP ECC for the system or while using the system.
Methodology to be adopted for preparing Business Blue Print:
Contents
Page Numbers
# Topic
Start End
0 Process Scope – List of Business Processes 6 7
1 Material / Services Coverage and Procurement Types 8 9

2 Organizational Chart 10 10
3 Enterprise Structure 11 12
4 Purchasing Group 13 13
5 Material Group 14 14
6 Material Coding 15 15
7 SAP Business Process for M/s. SUNSTAR 16 52
8 Pricing Matrix 52 52
9 Integration Points 53 54
0. Process Scope – List of Business Processes
Proces
Process Description
s Id
4.1 Master data Maintenance
4.1.1 Material Master Maintenance
4.1.2 Service Master Maintenance
4.1.3 Vendor Master Maintenance
4.1.4 Purchasing Info Records
4.1.5 Source List Maintenance
4.1.6 Maintaining Vendor Evaluation Criteria
4.1.7 Maintaining Conditions
4.1.8 Payment Terms
4.2 Material Requirement Planning
4.3 Procurement Process
4.3.1 Purchase Requisition
4.3.2 Request for Quotation
4.3.3 Maintain Quotation
4.3.4 Release Strategy
4.3.5 Purchase Order - Local (RM, PM, MRO Items)
4.4 Goods Receipts
4.4.1 GRN due to Quality Check
4.4.2 GRN due to Purchase of Materials (into Unrestricted use)
4.4.3 GRN due to Purchase of Materials (into Quality Stock)
4.4.4 GRN due to Stock Transfers

GRN due to Outbound Service / Job Orders(Purchase
4.4.5
Orders for Service)
4.4.6 Excise Transactions
4.5 Goods Issue
4.5.1 Goods Issue to Stock Transfers
4.6 Other Internal Movements
4.6.1 Goods Issue to Production
4.7 Logistics Invoice Verification
4.7.1 Entry of Vendors Invoice
4.8 Physical Inventory
1. Material/Services Coverage & Different Types of Procurement
Procurement at SUNSTAR OVERSEAS LTD. covers the following items:

• Raw Material-Paddy required for Production
• Packing Material and accessories required for Packed Finished Products
• Engineering & General Material required for day to day activities.
• Services - Adhoc & Periodic
SUNSTAR OVERSEAS LTD. makes the following type of purchases:

1. Procure-to-Stock
2. Need-based Procurement – based on Purchase Requisition
3. Capital
4. Service with material supply – Job work
5. Repairs
Brief Explanation of the type of Purchase:

1. Stock Type
In case of stock type, the re-order level for each material is maintained and stores create purchase requisitions. The
same is approved by stores in-charge and forwarded to Purchase ( Spares , Consumables etc). For most of these
items the vendors are fixed and price lists are available. The purchase orders are created by Purchase (Stores,
Spares and Consumables) & approved by various authorities depending on the authorization matrix.
2. General Purchase
In case of general purchase, concern departments raise a purchase requisition which is approved by their respective
H.O.D and is sent to stores where the availability of that material is checked. if material is not available, The same is
approved by stores in-charge and forwarded to Purchase, at purchase they check for available sources of suppliers
and price of that material is enquired with various sources. based on Price, Quality and delivery a best possible
vendor is selected and a PO is sent.
3. Purchase Requisition Type
For Purchase Requisitioned items, The user department raises a requisition in the form of B.O.M with details such
as division, cost center, requirement date and preference of vendor if any. is mentioned (certain cases buyer
nominates their vendors. so materials required for that order has to be procured from those sources).The same is
approved by the concerned dept. head and forwarded to the stores. Stores verify the stock and forward the same to
the Purchase . Inquiries are floated and quotations are received. In case technical recommendation is required, it is
referred to the Purchase Requisitioner. Price comparison is made for the approved vendors. A vendor is then
selected in consultation with the user dept. and a note sheet is prepared. Purchase orders are created and approved
by various authorities depending upon the value of the order.
4. Capital
For capital (budgeted) purchases, the user department prepares the Capital Expense Sheet (CAPEX). The same is
signed by the concerned Head of Dept. (HOD) and forwarded to Costing dept. who in turn allots the serial no.. The
Purchase Requisition along with CAPEX is sent to the stores which then be forwarded to Purchase (SSC). The
purchase sends intimations to various vendors for quotations. On receipt of quotations the prices are compared and
analysis is forwarded to the Technical Committee. The Committee selects a vendor and provide the reason for its
selection. The Purchase (SSC) then prepares a PO. The approval of PO is dependent on the value of the order.
5. Service Orders with Material Supply/ Job work Orders
Service Orders / Job work Orders are created on Service Providers in case where SUNSTAR OVERSEAS LTD.
needs to get its material processed from Service providers due to lack of that service capability / capacity with in
SUNSTAR OVERSEAS LTD.. After processing, SUNSTAR OVERSEAS LTD. will take back the entire processed
material.
Organizational Chart
Company Code
1100
M/s. Sunstar Overseas Ltd.
Plant 1 Plant 2 Plant 3 Plant 4

1110 1120 1900 1130
M/s. Sunstar Overseas M/s. Sunstar Overseas Ltd., Port Plant M/s. Sunstar Overseas Ltd.,
Ltd.,Sonepat Haryana Delhi
P.Org P.Org P.Org P.Org P.Org

S001 S002 S003 S005 S004
Paddy Packing Material Engg. & Gen. Matls Paddy Trading Matls
Purchase Purchase Purchase Purchase, Haryana Purchase
2. Enterprise Structure
Company Code
New Justification / Purpose of the
Code Description Organizational Unit
SUNSTAR OVERSEAS LTD. requires

1100 SUNSTAR OVERSEAS LTD. Pvt. Ltd.
maintaining Company Code which has
its own Chart of Accounts.
Plants
Manufacturing Plants
Current New Justification / Purpose of the
Code Description Code Description Organizational Unit
SUNSTAR OVERSEAS SUNSTAR OVERSEAS LTD. Pvt. Ltd.,

LTD., Sonepat 1110 Sonepat
SUNSTAR OVERSEAS LTD. Pvt. Ltd., SUNSTAR OVERSEAS LTD.

1120 Haryana requires maintaining different
Plants for Sonepat, Delhi, a Single
plant for its other branches and a
1900 Port Plant, Delhi port plant for Delhi.
SUNSTAR OVERSEAS SUNSTAR OVERSEAS LTD. Pvt. Ltd.,
LTD., Delhi 1130 Delhi
Purchasing Organization
SUNSTAR OVERSEAS LTD.
requires maintaining different
Purchasing organisation for
Purchase Department – S001 Paddy Purchase, Sonepat Purchase of Paddy/Rice, Purchase
Paddy/ Rice of General items/ consumables and
S002 Packing Material Purchase, Sonepat

Purchase Department –
Engg. & Gen. Material Engineering and General Material
S003 Purchase, Sonepat
for Purchase at Delhi Office.
SUNSTAR OVERSEAS
LTD., Delhi S004 Trading Material Purchase, Delhi
S005 Paddy Purchase, Haryana
3. Purchasing Group
ACC ACCOUNTS
CVL CIVIL MAINTENANCE
ELT ELECTRICAL MAINTENANCE
HRD HRD
MCM MECHANICAL MAINTENANCE
MPR MATERIALS PURCHASE
MTS MATERIALS STORE
OFD ORGANIC FOOD DIVISION SUNSTAR OVERSEAS LTD.
SUNSTAR OVERSEAS PDC PROJECT & DEVELOPMENT (CIVIL) requires maintaining different
LTD., Sonepat PDE PROJECT & DEVELOPEMENT (ELECT.) Purchasing Groups for different
PDM PROJECT & DEVELOPEMENT (MECH.) department.
PPC PPC
PPR PADDY PURCHASE
PRD PRODUCTION
QLY QUALITY
SLS SALES (DOMESTIC)
SYS SYSTEMS
UTL UTILITY
4. Material Group
Manufacturing / Procuring
Plant Material Group Product Type
Location
A001 ASSET
A002 CHEMICAL
A003 CIVIL
A004 CIVIL MAINT.
A005 CONSUMABLE
A006 ELECTRICAL
A007 MECHANICAL
Sonepat (Paddy Purchase A008 MISCELLANEOUS
Division) Sonepat (General A009 ORGANIC
1110
Items/ Consumables Division)
1120 A010 PACKING
Paddy Purchase Division,
1130 A011 PACKING MATERIAL
Haryana
Purchase Division, Delhi A012 PADDY
A013 PROMOTION
A014 RICE
A015 SEED
A016 SYSTEM
A017 TOOLS
A018 UTILITY
A019 WHEAT
5.Material Coding
Existing SAP
Business Process for SUNSTAR
To
Material Grou Grou
Ext tal Group
Type p1 p2
/ Le Logic1 Logic2 3
lengt lengt
Int? ng length
h h
th
Paddy Ext 10 Na Na Na Na Na No Material Code
Finished
Ext 13 Na Na Na Na Na No Material Code
goods
Spare
Parts
Packagin
g
6. SAP Business Process for SUNSTAR OVERSEAS LTD.

4.1 Master Data Maintenance
Existing Business Process Suggested Business Process

SUNSTAR OVERSEAS LTD. consists of Two SAP R/3 provides functionality for maintaining the following master
departments responsible for procurement of material. data:
PPD(Commonly called Paddy purchase department) and 2. Materials
Engineering & General Material Purchase department.
They both are responsible to the Vice President. 3. Services
Material procured by the PPD is 100% excise free, 4. Vendors
whereas in case of EGM sometimes material is excisable 5. Purchasing Info Records
such as purchase of any machinery etc., however the 6. Source List
excise is not refunded.
7. Vendor Evaluation Criteria
Paddy purchase department :
8. Conditions (Commercial)
Master data is maintained for the following
• Materials
The above master data will be maintained in SAP as explained in
• Vendors following processes.
• Store location
• Supervisor/ Contractor/ Purchaser
• Work master with packing sizes and item groups
• Packing sizes
• Mandi with their expenses
Engineering & General Material Purchase department :
Master data is maintained for the following
• Materials
• Vendors
Business Requirement :
1. Enhancement of the following master data is required.
Material, Vendor, Purchase info records, Source list,
Vendor Evaluation Criteria, Conditions have to be
maintained in SAP R/3.
4.1.1 Sub-Process Scope: Maintenance of Material Master

Material Master Material Type :
Paddy purchase department : SAP Standard Material types shall be used for all the materials.
At Paddy purchase department Material details are For example FERT, ROH, HALB etc.
maintained for Raw materials, Semi finished material, Materials with the same basic attributes are grouped together and
Finished material etc. Materials are maintained in the assigned to a material type.
material master for day to day transactions and to The material type also decides -
maintain information. • Whether the material number can be assigned internally or
At PPD, material identification is based on its name. externally
• Which screens appear and in what sequence
• Which departmental data you may enter
Engineering & General Material Purchase department : What procurement type the material has; that is, whether it is
At Engineering & General Material Purchase department manufactured in-house or procured externally, or both (for Semi-
Material details are maintained for General materials, finish).
Packing and consumable material etc. Materials are

maintained in the material master for day to day All required master data has to maintain in the SAP system.
transactions and to maintain information. SUNSTAR should provide all required master data in the specific
At EGM there is no principle of material codification for format (Excel).
any materials. At SUNSTAR OVERSEAS LTD. on material Industry wise, Material
type wise, material group, valuation, Class, Storage location,
Quality, Classification views are maintained. Only for Raw material
and packing material, MRP views are maintained. Material will be
Business Requirement grouped according to their characteristics maintained.
To Provide logic for identification of materials based on Example:
the material coding.
RAW MATERIAL VARIETY MATERIAL CODE
1. Raw materials to be given external number (Code).
PADDY BASMATI A UNDRIED-RAW PAD-AA-RW
2. For Engg. & General items external number to be
given. PADDY BASMATI A UNDRIED OR 0 PAD-AA-O0
3. Material Group to capture material name. PADDY BASMATI A UNDRIED OR 1 PAD-AA-O1
4. Material coding for all material types will be provided PADDY BASMATI A UNDRIED ORG PAD-AA-OR
as per the requirement. PADDY BASMATI A UNDRIED ORG BUFFER PAD-AA-BF
5. Material groups are maintained in order to meet the PADDY BASMATI A UNDRIED ORG DEM PAD-AA-DM
analysis & reporting PADDY BASMATI A UNDRIED ORG EEC PAD-AA-EC
requirements. Material is coded for eg. PAD-AA-RAW (Specifies the raw material-
Paddy Basmati of A Grade). Each material is created with respect
All materials and their related information should be to a Industry sector specifying which industry they are into in and
the material type ie. The material which is to be created is a raw
maintained in SAP. Re-order level should be maintained material or finished material.
for General material and Spares. Quality checks are to For each raw material (Paddy) in SAP following views are to be
maintained.
be in place for all the raw materials as well as for some
• Basic data View 1 & 2, here the user has to maintain the
EGM material by the indentor. material description say paddy basmati of A Grade, base unit
of measure ie. Procurement is done in Kilogram/ Quintal,
Material group specifying the group of material it is raw

material or finished material.
• Classification view in this the user has to maintain the class.
In class the values assigned to a characteristics is being
maintained. Here parameters such as admixture, chalky,
green etc. can be maintained in percentage.
• Purchasing view, here the user has to maintain the order
unit. Ie. paddy is procured in bags and maintained on quintal
basis. GR processing time ie. Number of workdays required
after receiving the material for inspection and placement into
storage.
• Accounting view in this the user has to maintain Valuation
class of the material, each material of different material type
say valuation class of raw material is different from valuation
class of finished material. Moving average price is being
maintained ie. Price at which the paddy is being procured. It
keeps on changing whenever the purchase price changes. In
case of finished material generally the standard price is
maintained.
4.1.2 Sub Process Scope: Service Master Maintenance

Engineering & General Material Purchase department : Service masters shall be maintained for various Services with
As such there is no service master in EGM department, Description, Category and Unit of Measure using the ‘Master Data
Services are procured for Plant maintenance. There exist Maintenance’ in ‘External Services management’ of Materials
AMCs for Maintenance of Equipments. management Module.
Following critical information shall be maintained in the service
master record:
Business Requirement.
The same should be captured in the system for services 1. Service Number which gives a unique identification to the
taken by any department. service. This shall be internally generated by the system.
2. Service Category which describes whether a service is an
internal service or a service to be procured externally or services
performed for third parties. In conjunction with the organizational
(maintenance) status of the service master, the maintenance views
can be controlled i.e. whether a service master can have – a basic
data view, controlling view, sales & distribution view. Based on the
type of service, the service category shall be maintained.
3. Description which describes the service in brief
Examples of Services for which Master records shall be created :
1. Annual Maintenance Contracts
2. Repairs in SUNSTAR OVERSEAS LTD. premises
3. Repairs outside
4. Rental Services
5. Lease Services
Identification of Service item is done with the help of ACTIVITY

CODE.
Example :
ACTIVITY NUMBER ACTIVITY CODE
AMC OF MILLING MACHINE 1000001
Activity code is unique for each type of service.
Services are being procured by maintaining service master say M/s.
Sunstar Overseas Ltd., want to procure services for AMC of milling
machine.
For each service material (AMC of milling machine) in SAP
following data are to be maintained.

• The user has to maintain the service category ie. Whether
service is of AMC or repairing type.
• Valuation class of the service item.
• Detailed description of service ie. AMC of milling machine
and its activities to be performed during AMC.
Now a Purchase Order for a service (AMC of milling machine) can
be created with reference to the service created.
4.1.3 Sub Process Scope: Maintenance of Vendor Master

At SUNSTAR OVERSEAS LTD., Supplier Master Vendor Master Data shall be maintained at the following levels:
Records contains all the information necessary for any • General data
contact with a certain vendor, in particular for conducting
business transactions. • Company Code Data
The following details for Vendor are Maintained at • Purchase Organisation Data
SUNSTAR OVERSEAS LTD. like Vendor Address,
Contact Number, Person responsible, Pricing, Terms and
conditions etc., CST, TIN. General Data:
In case of paddy purchase, pucca arats(Branches) are The general data includes such information as the vendor's address
negotiated on the behalf of farmers and in case paddy is and telephone number, the language of communication with the
purchased from Vendors, negotiation is done directly vendor, email address, etc.
with the Vendor. Company Code Data:
At the time of Goods Receipt and Invoice verification Accounting information shall be maintained at company code level.
Vendors come into picture (in the case of purchase from This data
brokers). includes, for example, payment transaction data and the number of
Brokers are given Commission charges. the
Some fixed expenses are charges by all seasonal paddy relevant control account. Only one control account can be
suppliers like Dami, Labour, Cess etc., these are assigned to each
maintained in Vendor Master. vendor. And we can maintain vendor customer relation and vendor
Business Requirement. bank details in
In Vendor Master the following data should be vendor master.
maintained. Purchase Organisation Data:
General information (Address, Correspondences, Purchasing data like contact persons, terms of delivery, etc. shall
Company related information be
Terms of payment maintained at purchasing organization level. Vendor’s excise
Pricing procedure is required to be maintained. It is details can be
different for Local Vendors and for Import Vendors. maintained using the CIN functionality of R/3.
Terms of payment depends upon the vendor, Material Identification of Vendor is also done with the help of CODE.
and negotiations and they are as follows: Example :
For Local Vendors Vendor Name Vendor Code
For Example : Industrial Sales Promoter HRI10000
100% advance against Order First two digit of the code signifies that the vendor is of harayana
100% advance against delivery state and third character specifies that his name begins with I and
02 Days credit from the date of purchase by the branch next comes his serial number.
07 Days credit from the date of purchase by the branch This vendor code shall be maintained at Co. code and purchasing
organization level.
12 Days credit from the date of purchase by the branch
In Vendor master record all data pertaining to the vendor ie. His
15 Days credit from the date of purchase by the branch bank details, Office address, payment terms ie 100% advance or
Payment against Mandi dhara. after job completion, order currency ie in INR or other currency and
partner function ie invoicing party is same as supplying party can be
maintained.
Vendor Schema Group
The schema group mentioned in the vendor master is useful in

determination of pricing procedures. Ex.
“BLANK” Standard schema vendor
01 Schema vendor
02 Domestic Vendor
03 Import vendor
Vendor account Group:
Vendor account Group mentioned in the vendor master is useful to
group the vendor Ex:
1. Employee vendors
2. Service vendors
3. Import Vendors
4. Domestic Vendors
5. One time Vendor
6. Internal Vendors
7. Miscellaneous Vendors
4.1.4 Purchase Info Records

At PPD and EGM department, Purchase Info Records are Purchasing Info records shall store vendor - material details for
Maintained for all types of materials. various types of procurement like standard, sub-contracting,
pipeline, consignment etc.
Business Requirement These details shall be maintained for a Plant and Purchasing
Organization. Details like Prices & other conditions, under and over
Purchase info records should store vendor material delivery tolerances, vendor evaluation data are stored in these
details for various types of procurement like standard, sub
contracting, etc. records. The information in the latest purchasing info record for a
These details should be maintained for plant and combination of vendor and material for that purchasing organization
purchasing organisations at material level. and plant shall always be defaulted when creating a Purchase
Order. Purchasing info records shall be created manually or
Other details like prices, conditions under and over automatically. Manual Creation shall be done when a purchasing
delivery tolerances(like rate/ quantity), vendor evaluation info record doesn’t exist for a vendor – material combination, for a
data are stored in purchase info records. purchasing organization and plant. Manual Update shall be done.
When there are changes in the values of the Purchasing Info
Records. Automatic Updating/Creation shall be done at the time of
creation of Request for Quotation, Quotation or Purchase Order for
those records which already exist. Purchasing Info Records for
multiple validity periods can be maintained at the same time. This
shall also be used for generating Negotiation Sheet for a vendor.
Provision for deleting obsolete info records is also available.
Example :
In Purchase info record all data such as when raw paddy was last
procured, at which rate and from which vendor, what was his
payment term and all other information’s related to the purchasing
can be overviewed.
4.1.5 Source List Maintenance

At both the PPD & EGM department source Lists is being 1. The source list shall be used to maintain the possible sources of
maintained manually. supply of material for a given period or to block a possible source of
Business Requirement supply for a specific period or to completely block the external
procurement of a material.
Allowed (and disallowed) sources of a material for a
2. A Source List shall be created automatically or manually.
certain predefined period should be Maintained.
3. Automatic creation of a record in the source list for a particular
material is done when a purchasing info record is created. Source

list shall also be automatically created when an outline agreement
is created.
4. Manual maintenance shall be done when a new source / new
material is identified.
Example :
M/s. Sunstar wants to procure paddy from M/s. Industrial sales for
the period of 01-04-2006 to 30-05-2006.
Source list is maintained for a particular material at plant level. Here
the user can maintain the validity period of the vendor who is
authorised to supply raw paddy for the period of two months only
and the purchasing organisation responsible for procurement for
that plant.
4.1.6 Maintain Vendor Evaluation Criteria
Existing Business Process Suggested business process

At SUNSTAR OVERSEAS LTD., Vendor Evaluation is 1. SUNSTAR OVERSEAS LTD. shall do Vendor evaluation to
followed manually. analyze and assess the performance of external suppliers and for
vendor selection.
Business Requirement 2. Vendors shall be awarded scores for a number of different

criteria. Vendor’s overall scores shall be used to determine whether
Vendor evaluation has to be done for the raw material’s/ they are retained in or eliminated from SUNSTAR OVERSEAS
consumables supplier based on Price, Quality, Safety LTD.’s vendor base. Vendor evaluation shall be done on the basis
and Delivery. of the following main criteria: Price, Quality, Delivery, and Service.
Under the main criterion, again further sub-criterion can be defined
like Price level, Price History, Goods Receipt, Quality Audit,

Complaints /Rejection level, On-time delivery performance,
Quantity reliability, Compliance with shipping instructions,
Confirmation Date etc. SUNSTAR OVERSEAS LTD. shall define a
scoring range i.e. a common scale on which the vendors can be
rated. The scale shall be between 1-100 points For every main
criteria, a weight age can be assigned The overall score shall be
calculated from the scores of the main criteria taking the weighing
factors for each main criterion into account. All the values shall be
decided at the time of configuration and shall be documented in the
configuration document.
Example :
Vendor HRI10000 wants to be evaluated for delivery. In SAP with
functionality of sub criteria a vendor evaluation can be done for on
time delivery, quantity reliability etc.
4.1.7 Sub-Process Scope: Maintenance of Conditions for Procuring Materials

At SUNSTAR OVERSEAS LTD., all information 1. Prices shall be of three types – (a) Gross Price which is exclusive
pertaining the accounts is being maintained manually. of Discounts or surcharges, (b) Net Price inclusive of surcharges,
discounts, taxes, (c) Effective Price which includes the Net Price
but taking delivery costs, cash discount and other incidental costs.
4.1.7.1 Prices
Pricing conditions shall be maintained in the purchasing info
Business Requirement records or in the header or item level as applicable.
Prices/ taxes to be made a part of the pricing procedure.
Prices are maintained as gross price which is exclusive of Example :

discounts or surcharges. Net price is inclusive of Determination of Purchase Price
discounts, surcharges. Effective price which includes net
price, taxes, delivery costs, cash discount, duties, Purchasing creates a PO for 100 Bags of Paddy PAD-AA-00 at
insurance, and other incidental costs. Rs.250 each, to be supplied by vendor Miller Co. No outline
purchase agreement exists with this vendor. The agreed condition
(discount of Rs. 10 granted on each bag purchased) is stored in an
info record. No general price stipulations apply.
The system carries out the following price determination process:
1. Assignment of price calculation schema: RM0000
2. Search for condition records belonging to the condition types
listed in the calculation schema:
The system searches only for condition records belonging to
condition types that are marked in the schema as non-manual.
Condition type PB00
a. Determination of access sequence 0002
b. Accesses within access sequence 0002
Accessing of condition table 068 (plant-specific agreement item) is
not carried out
Accessing of 016 (contract item) is not carried out.
Table 017 (info record) is accessed and the condition record is
found.
Condition records belonging to the other condition types are then
sought.
In the example, no further condition records are found because
condition type RB00 (discount) is a supplementary condition
belonging to condition type PB00 and thus has no access
sequence of its own.
The system then suggests a price of Rs. 240 per bag in the
purchase order. The buyer can then enter further conditions

(covering delivery costs, for example).
The following graphic illustrates the steps in the process:
4.1.7.2 Discounts
Business Requirement The Discount condition records shall be maintained with conditions
Discounts are to be maintained as discount per unit, and values associated with conditions. While processing a
discount per value, discount percentage. transaction system will search for valid record and as soon as it
finds the record matching the condition of sale it should return a
discount value. Some of the discounts can be maintained at the
time of preparing the purchasing document.
4.1.7.3 Excise Vendor, Material and other factors that determine the Excise duty
Business Requirement shall be maintained through the CIN Module of SAP R/3.
Engineering & General Material Purchase department This shall include the Exceptional rates that may be applicable for
Some of the inputs are excisable which adds to the cost certain vendors and material combination. This shall also take into
of finished goods. account different tax rates based on the Vendor’s Status (SSI or
Normal). The setoff of excise duty or inventorying of excise duty will
No credit is availed. be controlled by Tax codes.
Paddy purchase department
There are no inputs which are excisable.
4.1.7.4 Sales Tax
Business Requirement Tax condition records can be maintained in the system for various
Sales tax has to be maintained as a condition type levels of taxes, like central and state level, which will be
required for purchase.(VAT/ CST) automatically determined during a transaction depending upon the
receiving plant and the vendor’s locations.
The tax values are maintained as percentages with the help of tax
codes.
4.1.7.5 Import Duty
PPD & EGM department This condition type will be available with a separate pricing
There is no import duty. procedure.
4.1.7.6 Freight
Business Requirement The Planned Freight costs shall be booked in the same Purchase
Freight charges are levied on purchase from all markets. Order for which the procurement is to be done. In cases where the
Material carrying party is different from the one on whom the PO is
raised the Freight Vendor shall also be maintained in the same PO.
4.1.7.7 Service Tax
Business Requirement Service Tax will be maintained as condition type
Service tax is to be maintained as condition types.

4.1.8 Payment Terms

There are different payment terms in existence like mandi 1. SUNSTAR OVERSEAS LTD. shall use the standard payment
dharas. terms wherever possible. Wherever required, specific payment
terms shall be defined in the system like Payment with LC.
2. Milestone payments can be made against each milestone in the
Service Order by making those corresponding entries in the Service
Business Requirement Entry Sheet and doing the Invoice Verification based on the Service
The same should be captured in the system. Entry Sheet.
4.2 MRP

Based on the stock level, Planning is made in 1. For this Business Requirement it shall be taken care of during
Engineering & General Material Purchase department for MRP/CBP run.
the spares/ other consumables. 2. This requirement shall be managed through consumption based
In Paddy purchase department Re-order Planning is not planning.
maintained as of now. Raw material such as paddy are 3. This business requirement shall be taken care of through
procured on the need basis or future forecast. scheduling agreement.
Scheduling Agreements:-Scheduling Agreement in form of outline
purchase agreement under which materials are procured on
Business Requirement predetermined dates within a certain time period.
Automatic triggering of PR’s to be done based on MRP A scheduling agreement consists of a number of items, for each of
for all RM and Accessories. which a procurement type is defined. The following procurement
Engineering & General Material Purchase department types exist:

Wants to maintain re-order level planning for Spare parts • Standard
as well as for some other items.
• Subcontracting
• Consignment
• Stock transfer
Delivery of the total quantity of material specified in a scheduling
agreement item is spread over a certain period in a delivery
schedule, consisting of lines indicating the individual quantities with
their corresponding planned delivery dates.
For scheduling agreement items involving subcontracting, you can
specify the materials or components to be provided to the
subcontractor with respect to each scheduled delivery of the
ordered item.
Conditions can apply to the entire scheduling agreement.
Conditions at item level apply specifically to the material to be
supplied in each case. Costs can be apportioned among various
Controlling objects via the account assignment.
4. This shall be covered in “Source list” where list of vendor shall
be maintained with respect to materials.
5. It shall be maintained through MRP run. And as per the
requirement the occurrence of MRP run shall be decided by the
authorised person.
Material Requirements Planning:- The main function of MRP

(Material Requirements Planning) is to ensure Material availability
at right time and in right quantity. It is used to procure or produce
the requirement quantities on time both for internal purposes and
for sales and distribution. This process involves the monitoring of
stocks and, in particular, the automatic creation of procurement

proposals for purchasing and production based on the
requirements against the available stocks.
You must first create the master data to be able to work with the
MRP component. To do this, you require the following components:
• Material Master
• Bills of Material
Consumption Based Planning:- Consumption-based planning is

based on past consumption values and uses the forecast or other
statistical procedures to determine future requirements. The
procedures in consumption-based planning do not refer to the
master production schedule. That is, the net requirements
calculation is not triggered either by planned independent
requirements or dependent requirement. Instead, it is triggered
when stock levels fall below a predefined reorder point or by
forecast requirements calculated using past consumption values.
All the materials should be classified under MRP/CBP. Accordingly
MRP type should be assigned to the Material. If a material falls
under CBP, Re-order level(ROL) is to be identified with maximum
stock level. When MRP is run, the system will check the current
stock levels against the re-order level. If the stock level is less than
the ROL then a procurement proposal is raised up to the Maximum
stock level quantity.
In consumption-based planning, the following MRP(Material
Requirement Planning) procedures are available:
Reorder point procedure
Forecast-based planning
Time-phased materials planning
Example :
A reorder level can be set for a material say “Cartridge”. As soon as
the reorder level reaches the value set in the material master
record, system generates requests for raising a purchase
requisition.
4.3 Procurement Process

At SUNSTAR OVERSEAS LTD. procurement is The Procurement process has various stages like Purchase
categorised into Raw material (Seasonal/ Non seasonal) Requisition, Request for Quotation, Quotation Maintenance,
Purchase, General Purchase, Subcontracting, Service Purchase Order, Contract, Scheduling Agreement, Goods Receipt
purchase, Stock transfer. In seasonal purchase from and Invoice Verification.
Vendors some fixed expenses like Dami, cess etc. are Purchase requisition can be created for a given plant storage
automatically calculated when doing Goods receipt location, purchase organisation, material code and delivery date.
according to rates define in Vendor Master.
Request for Quotation can be created by giving the material code,
Purchase orders are sent to respective vendors based on Plant, Storage location, purchase organisation, quotation deadline
which materials are received. Vendors invoice is verified and requirement date. Vendor prices can be maintained and price
with goods receipt and forwarded to Accounts comparison can be made.
department.
4.3.1 Sub-Process Scope: Purchase Requisition
Existing Business process Suggested Business Process

Engineering & General Material Purchase department Purchase Requisitions are created under the following situations:
The User of M/s. Sunstar Overseas Ltd. will initiate Requirement Analysis:
requisition in the case of Engineering Items. The request 1. Purchase Requisitions shall be created - automatically on MRP
first reaches the stores department where they checks Run or manually by the requesting department. Manual creation of
the availability of stock. Even if the stock is available the Purchase Requisitions for Stock Items shall be restricted to the
request is forwarded to higher authority for approval with corresponding MRP Controllers through authorization profiles.
appropriate remarks. For the Capital items requisition
comes from Higher level User. 2. Manual creation of Purchase Requisition for MRO items will be
controlled by authorization profiles. Release Strategy shall be
incorporated for release of Purchase Requisition as per the
Paddy purchase department requirements.
Purchase requisition is not created for procuring the 3. Purchase requisition shall be created manually by the
paddy. corresponding department.
General items
Departments will initiate requisition which is collected and Example :
reviewed by the Vice President and forwarded to M/s. Sunstar wants to procure paddy basmati of A Grade, material
Purchase department. no. PAD-AA-RAW, of 100 Bags from the Vendor HRI10000. For
Services this a request is to be fed in the system, which reaches
Purchase requisition is created for service items by automatically to purchase department for procurement of paddy.
concerned department at SUNSTAR OVERSEAS LTD.
Vice President is authorised to procure services for which
Service purchase order is created by Purchase
department or concerned department themselves.
Packing materials
Purchase requisition is created by the Paddy purchase
department for bardana, based on their requirement for
procurement of Paddy. Requisition for packing material
for sale is created by PPC department.
Business Requirements
Purchase requisitions are to be created manually and

automatically through material Requirement planning.
4.3.2 Sub-Process Scope: Request for Quotation

Against the PR enquiries are floated to concerned
The RFQ and the quotation form is a single document. Prices and
suppliers for quotation through mails/fax and prices and
conditions quoted by vendors are entered in the original RFQ. If you
other terms & conditions are enquired. Based on
have issued an RFQ to several vendors, you can have the system
conditions like price quality and delivery, the order will be
determine the most favorable quotation submitted and
finalised.
automatically generate letters of rejection to the unsuccessful
bidders. You can also store the prices and terms of delivery from
certain quotations in an info record for future accessing.
Business Requirement 1. It is possible through EP Module in which Vendor would be given
Request for quotations are to be created and quotations authorization to access their system and see their Stock etc.
has to be maintained and price comparison should be
done. 2. Possible through EP. Login would be required for a vendor
SUNSTAR OVERSEAS LTD. wants Request for Example :

Quotation to be done for Engineering & General Material M/s. Sunstar can invite various vendors by giving them enquiries for
Purchase department. quoting of the rates for procurement of material PAD-AA-RAW.
4.3.3 Sub-Process Scope: Maintain Quotation

Raw materials A quotation is legally binding on the vendor for a certain period. The
Quotations are not maintained in the system. quotation is the vendor’s response to a request for quotation issued
Packing materials by a purchasing organization.

Quotations are received from the individual vendors
A quotation consists of items in which the total quantity and delivery
(Fixed) and are maintained in the system.
date of an offered material or service are specified.
An item of a quotation may contain a delivery schedule made up of a
number of schedule lines in which the total quantity is broken down
Business Requirement into smaller quantities to be delivered on the specified dates over a
Quotations have to be received from the individual certain period.
vendors and should be maintained in the system.
An item of the procurement type External service contains a set of
service specifications. The latter can be hierarchically structured. The
summary view of such a hierarchical structure is referred to as an
outline. The outline comprises a number of levels, each representing
a level of the service hierarchy. The quantities of the quotation are set
out in service lines, representing individual jobs or activities
Example :
M/s. Sunstar wants to procure paddy PAD-AA-00 from Vendor
HRI10000 and rejects other vendors. In SAP first they have to enter
the rates of all the Vendors and then reject the bid of vendors whose
rates are higher.
4.3.4 Sub-Process Scope: Release Strategy
The Release strategy shall be made applicable for Purchase

Engineering & General Material Purchase department Requisition, RFQ, and contracts, Purchase Order. The various
Purchase Requisition levels identified for each document will be controlled by
PR will be authorised by the Vice President./ approving Authorizations.
authority The process for release followed is of Release Procedure w.
Purchase Order Classification. In this :
PO is not routed through authorisation process. 1. The characteristic values from a requisition or external
purchasing document are passed on to the classification
Paddy purchase department
system.
Purchase Requisition & Purchase Order
2. The system checks whether the values correspond with release
PR/ PO is not routed through authorisation process.
conditions. If so, it assigns a release strategy.
3. The persons responsible for the release codes process the
document in the sequence defined in the release strategy.
Business Requirement
A procedure of authorization for purchasing requisition
and Purchase Order should be provided for EGM Example :
department.
The request for Procurement of Paddy material PAD-AA-00 can be
set for release at the time of raising a requisition and request for
release can be set before a PO is sent for printing. If the request for
release is set at PO level, unless PO is released it cannot be
printed.
The following graphic illustrates the process, taking a requisition item

that is subject to the release strategy S4 as an example:
4.3.5 Purchase Order

Paddy purchase department Purchase Orders are created for the external procurement of
They directly raises a Purchase Order/Transfer Order on materials or services from a vendor. These services can be account
Vendor/ Branch since they have to stock the material assigned to a Cost centre. Separate pricing conditions are
during the season. PPD department requests all maintained for services and Imports.
branches to procure the specified variety of paddy from
the market. On their request, a person from their branch PO creation method is different for Normal process ie. For
approaches the kachha arat, who reaches the mandi and Procurement of paddy and for a Service. For stock material
enquires about the rate. He then informs the current Purchase is created without any account assignment. Goods
prevailing rate in the market to the branch, who then Receipt is done against PO which results in the increase in stock
forwards it to concerned person in PPD department. Who of the materials. Similarly Import PO can be created. After custom
on getting a consent from the top management, asks the duty is paid GR is done.
branch to procure the paddy. PPD department then raises
the PO for the same on the branch. After getting a PO, The following graphic illustrates how purchasing activities can be
the branch informs the kachha arat to procure the paddy. streamlined with regard to source determination for purchase
requisitions and the creation of follow-on documents.
PPD department then they raises Transfer order for
moving the material from branch to M/s. Sunstar ,
Sonepat. PPD person explained that since the branch is
in the name of Sunstar, they cannot directly raise a PO in
the name of branch. He also explained that if they raises
a PO in the name of the kachha arat, they won’t be
getting the VAT benefit.
Procurement of Organic paddy is done by different

person of Organic business development. They do not
procure directly through farmers. A Purchaser is involved
between the farmer and the Sunstar. They explained that
they have identified some farmers who does the organic

farming. They keep a vigilance on that farmer. A external
agency is also involved, who does the certification at the
farmers land and also certifies the quantity of the paddy to
be produced in his land.
M/s. Sunstar raises PO in the name of the purchaser and
also makes the payment to him only, who in turn passes
on the payment to the farmer.
M/s. Sunstar also keep track of each farmer, as to how

much quantity of paddy is being supplied by the farmer.
They also give incentive to the farmers who does
harvesting for them for organic paddy.
Engineering & General Material Purchase department

Once the indent is approved by the Vice President it
reaches at the EGM department, where they does the
further processing. They generally have fixed vendor for all
the jobs. They call the quotations from them on the basis
of which they raise the Purchase Order on them. In case Example :
they have to procure new item, they invite various bidders
Once the requisition for release of Purchase requisition for
and after further negotiation with them they finalise the
Purchase of Paddy ie PAD-AA-00 is cleared then only the
vendor on which a purchase order has to be raised.
purchase department can raise the Purchase Order on Vendor
HRI10000.
Trading Goods
M/s. Sunstar does the trading of goods from their Delhi PO and its reminder can be converted into PDF file which can be
office. They does procurement from the agent and gets the sent to Vendors as an attachment. Soft copy will be uploaded in
material delivered at the customers point. the system along with the PO containing details.
Service Order :
Service contracts are created for periodic services. To Create a Purchase order for Service select item category D
Services are also procured by Plant maintenance and account assignment Category K, system will ask for a service
department against maintenance order. entry number, quantity and save the document. Hence service
PO is created.
Payment is done for the services provided.
Example :
AMC exist for the maintenance of Equipments, in which
material is supplied by SUNSTAR OVERSEAS LTD. And M/s. Sunstar want to raise a service order for AMC of milling
in some case material is supplied by the Vendor also. machine. For this they have to raise a Service PO on a Vendor.
Payment is done on yearly basis/ monthly basis and
sometimes in advance. Stock Transport Order :
Service Contracts related to labour is being handled by It is required for transferring the material inter plant. On raising the
Stores paddy and rice department. At present they don’t STO, the stocks and values move into the buying plant from the
raise any PO on the Contractor. They have a database of supplying plant.
all the settled rates for all contract related activities such
as shifting of paddy bag from one location to other location Example :
or to Haudi. M/s. Sunstar Overseas Ltd., Sonepat raises a Stock transport
Contractor provides them the bill on monthly basis, which order for getting the material Pad-AA-00 from their other branch at
is then send to Accounts department after certification. M/s. Sunstar Overseas Ltd., Karnal. In SAP they can keep track
of how much of the material is in transit. Once inwarded by the
HR department looks after the service Contract, such as buying plant ie. M/s. Sunstar, Sonepat the inventory of the buying
of canteen/ bus services. At present they don’t raise any will increase.
PO in the name of the service provider, it is just a verbal
commitment. M/s. Sunstar have the finalized rates with
them on the basis of meals in case of canteen contract.
However, they are providing meals to their employees at
subsidized rate, the additional cost is being absorbed by
M/s. Sunstar. Other departments can also raise requisition
for service like Systems department can raise requisition
for Computer cartridges refilling.
They want Service Purchase Order to be created. M/s.
Sunstar wants to keep track of the farmers delivering the

paddy to the purchaser, which can be used in future for
paying incentive to the farmer also for knowing which lot
has been supplied by which farmer. M/s. Sunstar wants all
the processes to be mapped in SAP.
4.4 Goods Receipt

GRN is a must for all types of materials. The receipt of goods from an external vendor or from production. A
GR is done in the following cases goods receipt leads to an increase in warehouse stock. System
distinguishes between the following types of goods receipts:
GR at Plant (SUNSTAR OVERSEAS LTD.) for Raw
materials, Trading goods, Spares, machinery and all • Goods receipts with reference to a reservation
EGM material, Packaging and job from sub-contractor.
. Goods receipts with reference to an order
Business Requirement . Other goods receipts
1. The Process of Goods Receipts of goods has to be
• It can be covered through EP. Login access to be provided to
maintained.
access PO History.
2. The supplier can get the Intimation of receipt of
material, status of goods via Net.
Example :
Vendor HRI10000 has brought the material PAD-AA-00 at the
inwarding gate of M/s. Sunstar. When the person at the Sunstar
does the Goods receipt of the material then the stock of the
material PAD-AA-00 increases in the SAP System.
4.4.1 Sub-Process Scope: GR due to Purchase of Materials (Quality Check)

All the Raw Materials are sent to quality inspection before When material is posted to quality inspection stock the system
receiving into stores. automatically creates a inspection lot. Once the quality check is
If the materials do not conform to the Quality requirement, cleared the material is transferred to unrestricted use stock.
they are rejected or rate is re negotitated. 1. This is a standard feature of SAP
2. M/s. SUNSTAR OVERSEAS LTD. must follow quality clearance
Business Requirement before Issuance of such materials.
1. At the time of goods receipt the system should
automatically send the materials to Quality inspection
Stock.
2. At the time of goods receipt the
system should automatically send the materials, which
do not require Quality inspection, to unrestricted use
stock eg. Stationeries.
4.4.2 Sub-Process Scope: GRN due to Purchase of Materials (into Quality Stock)

Paddy purchase department The materials which require quality inspection will be defaulted to
Raw Materials like paddy and others are sent to quality Quality Inspection during the GRN. The Stock is transferred to the
inspection. unrestricted use thru quality procedures. The quality decision when
made the stock gets transferred into unrestricted use stock or
M/s. Sunstar have some fifteen parameters which are blocked stock. The quantity posted in Blocked stock will not be
required to be maintained before Goods is being in usable unless cleared for quality reasons. The control for these
warded. transactions can be done through the authorizations for the users.
They are For excise entries, the following 2 processes can be adopted.
 Admixture : In this Sunstar quality person checks 1. The excise entries for RG23A or RG23C part I and Part II can be
the percentage of mixture of other paddy. performed simultaneously after GR.
 Average length : In this Sunstar check whether its 2. The Part1 entries for RG23A or RG23C can be performed first
length is ok. They record this in terms of mm. then GR is to be prepared and then Part2 entries are to be entered.
 Abnormal + Mixture : Sunstar check the paddy if it At this stage when the stock is lying in quality inspection, if Invoice
is looks healthy in appearance and sleek from Verification is done, the system blocks the invoice because of
down. They record it in terms of percentage. quality reasons (Since quality decision has not been made for this
GR Quantity).
 Broken : This activity is done after dehusking, here
Sunstar checks the brokenness of rice. They (At present No Excise is applicable)
record it in terms of percentage.
 Chalky : Here Sunstar checks as to how much At the time of goods receipt as soon as a Purchase order number
percentage of chalky is there. If a rice contains is entered in the system, materials against the purchase order are
more chalky it can be broken down easily. So a displayed if post to inspection stock indicator is ON in the material
more chalky rice is sent to parboiling plant for master system will automatically post the goods to inspection stock.
welding.
 Crackness : Here Sunstar checks as to how much Example :
percentage of crackenss is there.
M/s. Sunstar wants to send the material PAD-AA-00 for quality
 Damaged/ Discolour : In this Sunstar checks as to check before it is being sent into unrestricted stock of the system.
how much percentage of damage or discolourness As soon as a Goods receipt is done in the system the stock will
is there. move into quality inspection where it will be checked for
 Dead Paddy : Here Sunstar checks how much parameters on the left side.
percentage of paddy is there without rice. As soon as the material Pad-AA-00 is certified Ok. The material
 Green : In this test Sunstar checks the greenness quantity will move into the unrestricted stock.
of paddy. This is recorded it in terms of
percentage.
 Head rice : Here Sunstar checks that how much
percentage of rice is of full size.
 Husk : Here Sunstar checks the huskness level
after dehusking, it is also recorded in terms of
percentage.
 Moisture : Here Sunstar checks the moisture level
in paddy. This is also recorded in terms of
percentage.
 Red/ chobba : Here Sunstar checks whether the
rice is red coloured. This is also recorded in terms
of percentage.
 Short grain : Here Sunstar checks the length of
basmati paddy, it is also recorded in terms of
percentage. Here they checks how much of paddy
is below 7.0 mm.
 Yield Loss : Here Sunstar checks what is their
yield in this particular lot. Brokenness, head rice
and husk combine to give them the yield level. It is
also recorded in terms of percentage.
Apart from these tests in case of Organic paddy
pesticide residue test is also being done.

All the packing materials are sent to Quality inspection.
Some EGM material also need quality verification by the
indentor.
At the time of goods receipt the system should
automatically send the materials to Quality inspection
Stock.
4.4.3 Sub-Process Scope: GRN due to Stock Transfers

Materials are transferred between both the plants as and When GRN is made at the receiving plant the receipt is made with
when required. reference to the Goods Issue or Outbound Delivery document
prepared at the issuing plant. Excise invoice if required
accompanies the Goods Issue. A Performa Invoice can also be
generated with reference to the Goods Issue at the Issuing plant.
Business Requirement A Purchase order is created by the receiving plant in the name of
Provision should be provided for material transfers from supplying plant for certain materials. Materials are issued by the
plant to plant and to/ from our outside and internal supplying plant with respect to purchase order to receiving plant.
locations and branches. This material will be posted to stock in transit till goods receipt is
done at receiving plant.
Posting a stock transfer in two steps involves the following
process :
In the first step, you enter the removal from storage at the issuing
storage location.
In the second step, you enter the placement into storage at the
receiving storage location.
In the two-step procedure, you can only transfer material from the
unrestricted-use stock of the issuing storage location into the
unrestricted-use stock of the receiving storage location.
Reservations are not possible with this procedure.
After posting the removal from storage, the quantity is deducted

from the issuing storage location. The quantity is managed in the
stock at the receiving storage location (not in unrestricted-use
stock, but in stock in transfer). Also at plant level, the quantity is not
available for unrestricted use.
When the goods are actually received at the receiving storage

location, the quantity is taken over from stock in transfer into
unrestricted-use stock.
Example :
M/s. Sunstar, Sonepat wants to inward the material which is being
stock transferred from M/s. Sunstar, Karnal. The material PAD-AA-
00 is being inwarded by making the Goods receipt and the stock is
transferred into Quality lot for inspection. Once cleared from the
quality then only it reaches into unrestricted stock.
4.4.4 Sub-Process Scope: GRN due to Outbound Service / Job Orders(Purchase Orders for Service)

Paddy purchase department Purchase orders shall be created for job order. In the Purchase
At PPD goods receipt is made for materials supplied by Order, Bill of material to issued will be entered. After creating of PO
subcontractors after completion of job work. the material is issued to the vendor.
The completed job will be received at the plant.
Engineering & General Material Purchase department Example :
Subcontracting job work is done here. M/s. Sunstar wants to send the paddy material PAD-AA-00 for
subcontracting. They issue a Subcontract order to Vendor
HRI110000. M/s. Sunstar then transfer the material into the stock of
Business Requirement the vendor for further processing. After the processing is being
Provision for materials receipt for outbound services/Job done M/s. Sunstar receives the material with a different material
Work should be provided. number say PAD-AA-00-01(Semi finished material) into the
unrestricted stock.
4.4. 6 Sub-Process Scope: Excise Transactions

Excise is not applicable for raw materials such as paddy. Excise transactions are to be captured and maintained in the
However, in some General items it is applicable, but that system.
is not claimed. Incoming excise Invoice
The incoming excise invoice can be captured against a purchase
order, Stock transport order, contract, scheduling agreement,
Goods Receipt or without any reference to purchase order. The
Excise details are based on the combination of material, vendor,
Chapter id, Vendor Status (SSI or Normal, etc) and Tax code
Business Requirement applicable in the PO.
Provision for excise duty is not required. Local

The normal procedure of Part 1 then GRN and Part 2 can be done
or Part 1 and Part 2 entries can be simultaneously updated after
the GRN. In case of Partial CENVAT (for Capital goods) the On
Hold account is updated by 50% and the CENVAT Availed account
is updated by the 50%. It is possible to get a list of all the entries
against which the rest 50% can be availed.
The subcontracting challan for sending the goods to the
subcontracting Vendor is also possible.
The other transactions that shall be configured are Excise Invoice
for Sales, Return of Goods, Subsequent Invoices, Excise JVs, and
Creation of Excise Invoice for other movements.
Excise invoice is created before the GR, Upon GR, J1IB is created.
(Excise is applicable)
Imports
In case of Imports, the CVD that is claimed back is processed
differently from the normal procurement process. In this case, the
Invoice verification for CVD is done first and then part1 is taken, GR
is done and then part 2 is posted. This now creates the CENVAT
postings.
Before making GR for Import purchases, verification of duty

structure with respect to PO is done in consultation with purchase
department. After duty structure verification (B copy) invoice
verification is done by A&E. After furnishing of document Number
by A&E, excise invoice entries are made using J1IA, There after
GR is made by incorporating Internal document number of
J1IA.Part II is updated using the transaction code
J1IB.
Cancellation of excise is done in few of the cases wherever wrong

entries are made using rejection code.
Cancellation of Incoming Excise Invoice:

The cancellation of excise invoice is required in case the entries
done are wrong or incorrect excise invoice has been issued by the
vendor. The cancellation can be done with a rejection code which
can be used for knowing the reason for cancellation of the invoice.
SUNSTAR OVERSEAS LTD. shall provide the different reasons for
such cancellations which will be used in the configuration.
4.5 Goods Issue

Suggested Business Process
Existing Business Process 1. This is a standard feature of SAP.
At SUNSTAR OVERSEAS LTD. Goods are issued for 2. Only value based issue restriction can be made possible. No
the following processes alert is possible.
Goods issue to Subcontractor on returnable basis.
Goods issue to Production Order Example :
Goods issue to cost centre, department, plant ie. Goods issue to cost centre
Manufacturing unit say 1A, 2A. M/s. Sunstar wants to issue the stationary say A4 paper, 1000 Nos.
Goods issue to outside agency as sample. to the PPC department. The person in the stores will issue the 1000
Goods issue to vendor/ branch for lifting the material eg. Nos. of paper to a cost center allocated for PPC department after a
Bardana. person from PPC department sends a material issue slip.
The Process of Goods Issue of goods has to be
maintained.
4.5.1 Goods Issue due to Outbound Service/Job orders (Purchase Orders for services)

Paddy purchase department Provision for materials issue for outbound services/Job Work
When the plant work on its full capacity, and the should be provided.
requirement is more PPD department sends paddy for
further processing from outside. Example :
M/s. Sunstar wants issue the material PAD-AA-00 for
subcontracting. M/s. Sunstar then issue the material into the stock
There is are activities for job work. of the vendor HRI10000 for further processing. It will keep on
showing at Vendor stock unless it is being inwarded at M/s.
Business Requirement Sunstar, Sonepat.
Provision for materials issue for outbound services/Job
Work should be provided.
4.6 Other Internal Movements
Suggested Business Process

Existing Business Process In case of Production Requirement (Raw Materials), When the
Goods issue to production with respect to BOM Production person creates the Production Order, system
(Purchase Requisition). automatically creates a Reservation (with corresponding account
assignment like Production Order etc).
Goods issue to reservations.
Following are the list of movement types considered for

Business Requirement Reservation.
Provision for carrying out the transactions for the
following movements are to be provided:
a) Reservation for a Cost Center Requirement (Movement type 201
• Goods Issue to Production with Cost Center Assignment)
• Goods Issue to Sales Order for packing and despatch. b) Reservation for Production Order Req. (Movement type 261 with
• Production Order Assignment)
c) Reservation for Sale Order Req. (Movement type 231 with Sale
Order Assignment).
Transaction code MIGO is used for goods issues, the select goods
issue for order/ others/reservation enter the quantity to be issued
click on post to post the goods.
4.6.1 Sub Process Scope: Goods Issue to Production

Goods are issued to production with respect to bill of Goods Issue to production done with or without reservation.
material. When production activity starts for a particular Whenever a production order is confirmed, the confirmed quantity
order the goods are issued to production. will automatically get back flushed i.e. goods issue will take place
automatically.
Business Requirement Example:

Provision for issue of materials for Production. Goods issue to Production order
M/s. Sunstar wants to issue raw material Paddy PAD-AA-00 to
production for further processing. The person responsible for issue
the material to production will enter into the system the quantity to
be issued. Once issued the stock of Pad-AA-00 will deplete from
the store location of the stores.
4.7 Logistics Invoice Verification

M/s. Sunstar Overseas Ltd. Maintain all accounting The Logistics Invoice Verification interface has been reduced to a
related data in Computers. The invoice is verified by the single screen. Below you will find an overview of the screen areas
store user (Receiving person) with respect to PO quantity and their functions.
wrt. price and other terms and conditions.
(Price, quantity, freight sales tax and payment terms)
If the conditions in the PO are satisfied then the Invoice is
forwarded to Accounts department.
M/s. Sunstar Overseas Ltd wants all the invoices to be
processed using SAP.
The Invoice verification involves the following processes :

1. Invoice
2. Credit Memo
3. Subsequent Debit
4. Subsequent Credit
Invoice option is used when the payment is to be made to the
vendor.
Credit memo is used for materials returned back to the vendor.
During invoice verification the system shall display the materials
returned back to the vendor for which deductions will be made.
Subsequent debit shall be used for transactions where the Original
invoice has already been cleared and a subsequent invoice has
been raised by the vendor for materials already sent. Example :
Rate change with retrospective effect.
Subsequent Credit shall be used when any deduction/ penalty is to
be levied on the vendor.
There are 3 options which can be used for Invoice Verification.
1. Goods / Service Item
2. Delivery Costs
3. Goods/Service Item + Delivery costs
Based on the Goods/Service and delivery vendors, the option shall
be selected.
4.7.1 Sub-Process Scope: Entry of Vendors’ Invoice

M/s. Sunstar Overseas Ltd processes the invoices Local Vendor

manually using TALLY system. Invoices are received by Local vendor invoice shall be entered with reference to Purchase
the stores person who prepares the Goods receipt and Order. More than one purchase order can also be processed at one
these invoices are forwarded to Accounts department for time for one vendor. If required the vendor can be changed from
making the payments. the original vendor to whom the payment is to be done. If any
Invoice verification has been done for any GR for a PO, the quantity
Business requirement for this GR will not appear in the list. It is also possible to raise
credit memo against the goods returned to the vendor. In case of
The process in which vendors invoice is verified with Subsequent debit/credit to be made to the vendor account,
goods receipt has to be provided. and if Excise is (reasons can be change of rates for previous supplies made, etc),
applicable provision should be made to capture and post the entries are made using the Invoice Verification.
the excise invoice.
Adjustments to other accounts like Insurance claims Account, etc.
can be entered with invoice verification.
Unplanned delivery costs are costs which are not known at the time
of creation of purchase orders and these are charged in the invoice
sent by the vendor can also be entered during invoice verification.
In these adjustments wherever the invoice involves the CENVAT,
based on the Tax code maintained, vendor and material tax details
CENVAT clearing account is prompted and will be updated on
saving. Simulation facility is available for checking the accounting
effect.
Import Vendor
Imports invoice verification is slightly different from the normal
invoice verification. In this case the CVD applicable is taken into
RG23 Registers. In Import PO the CVD and other conditions are
maintained as delivery condition types hence the Invoice
verification for the CVD part is to be done first before the GR is
done. Then RG part1 entries are done then GR is done and then
RG part2 entries are posted. Invoice verification is done for the
Purchase Order. In this case No GR based Invoice verification is
possible (This is specific to Imports only).

The other functions as mentioned under Local Vendor Invoice
verification are also applicable for Import Vendor.
Example :
M/s. Sunstar wants to make payment to the Vendor HRI10000. On
signing of the invoice by the approved authority, it can be recorded
in SAP for making the payment. Once entered the invoice can be
handed over to the Accounts person for making the payment.
M/s. Sunstar if later on feels that they had made excess payment to
the vendor, they can raise a Credit memo for the same.
4.8 Physical Inventory

Sunstar Overseas Ltd.
At Sunstar Physical inventory is done as and when Material is procured from external or internal sources on the basis
required in case of Paddy store and in case of EGM of the requirements determined by Material Requirements
department stock taking is carried out at the end of Planning. The delivery is entered in Inventory Management as a
financial year. goods receipt. The material is stored (and managed under
Inventory Management) until it is delivered to customers (Sales &

Business requirement Distribution), or is used for internal purposes (for example, for
production).
A Provision for physical inventory has to be maintained
and its is frequency is to be increased.
During all transactions, Inventory Management accesses both
master data (such as material master data) and transaction data
(such as purchasing documents) shared by all Logistics
components.
Inventory Management is part of the Materials Management

module and is fully integrated in the entire logistics system:
Physical inventory component allows the carrying out of physical

inventory of the company’s warehouse stock for balance sheet
purpose. There are different types of physical inventory procedures
like Periodic Processing, Continuous inventory, Cycle counting and
inventory sampling. Any of these techniques can be used for this
process.
Periodic Inventory
In a periodic inventory, all stocks of the company are physically
counted on the balance sheet key date. In this case, every material
must be counted. During counting, the entire warehouse must be
blocked for material movements.
Continuous Inventory
In the continuous inventory procedure, stocks are counted
continuously during the entire fiscal year. In this case, it is important
to ensure that every material is physically counted at least once
during the year.
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 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.
Inventory Sampling
In MM Inventory Sampling randomly selected stocks of the
company are physically counted on the balance sheet key date. If
the variances between the result of the count and the book
inventory balance are small enough, it is presumed that the book
inventory balances for the other stocks are correct.
M/s. Sunstar does stock counting of the materials once in a year. In

SAP they can record the status of the counting done for any
material.
Example:
M/s. Sunstar wants to do the stock taking of the paddy RAW-AA-00.
They checks the physical stock of the material and the book
inventory balance ie. The system stock. If it is found that the
physical Vs system stock is same they can post it with zero
difference and if it is found that there is a variance they adjust the
stock to match it with the book inventory.
Counting of stocks is done using transaction code MI01.

1. Enter the Planned Count Date.
Planned count date is the date on which you have planned the
Physical
Inventory. It is used for posting the Physical Inventory differences.
By default the Document Date and Planned count date will be the
date on which you are creating the Physical Inventory Document.
2. Enter the Plant for which you want to carry out the Physical
inventory.
3. Enter the Storage location for which you want to create the
Physical
Inventory document.
4. Enter the Special Stock “O” if you want to create the Physical
Inventory document for material Lying with the Subcontractor.
5. Tick the check box Posting Block for blocking any posting for the
materials for which you are Planning the Physical Inventory.
6. Tick the check box Freeze Book Inventory, to freeze the Book
Stock.
7. On this you can give the Physical inventory number (PIN) also.
PIN will group all the PID’s in one Heading. This can be used
while printing the PID’s.
8. Enter the Material number for which you want to carry out the
Physical inventory. Here you can enter the list of materials and
generate single PID for all the materials. If materials are managed
in batches, enter the Batch number in Batch field
9. Use Save button to Save create the Physical Inventory
Document. System will give the PID number.
10. If in the initial screen you have selected Special Stock as “O”,
then same screen will appear as shown above except, additional
field of Vendor for entering the Subcontractor’s number will
appear on the screen.
11. Enter transaction code MI04. Enter the Physical Inventory
Document number , Fiscal year and the Count date.
12. Enter the Counted stock of the material which are in the PID’s
13. Save the Entry.
14. Enter transaction code MI07. Post the differences if any and
hence the physical
inventory process is completed.
7. Pricing Matrix
Pricing matrix is defined in the form of EXCEL-sheet. However, looking at the business scenario of SUNSTAR OVERSEAS LTD.,
there is already many ‘Pricing Schema’ exists out of which we suggested to choose few of them. Since list of Taxes and various
charges are so exhaustive. So it may not be easy to maintain one or two pricing Schema. To ease up the process we propose the
following “Pricing Schema”.
1- Raw Material – Local
8. Integration with FI, SD, PP, PM, QM and PS Modules
Integration with SD
1. Based on the type of order booking done in SD module, the purchase requisitions or process orders will be generated which
will be used for further processing of purchasing documents.
2. During the MRP Run the requirements will be calculated based on the existing Sales documents.
3. Delivery of Goods in SD module leads to a reduction in stock and return of goods increases the stock.
Integration with PP
1. Goods Issue for consumption against a production order will be done in the MM Module and this reduces the inventory of the
materials.
2. Goods receipt after production is received through the MM Module.
Integration with QM
1. Whenever the material is received, the quality inspection lot is created and after result recording, a transfer posting
automatically proposes the quantity to be posted to unrestricted/block stock after the results recording.
2. Quality Blocks will be activated for blocking invoices if posted prior to quality inspection.
3. Procurement of any material can be restricted to a period using the quality info record.
Integration with FI
1. During Goods Receipt:
Inventory Dr
GR/IR Clearing A/c Cr
2. During Excise Part II Entries
CENVAT Received A/c Dr

CENVAT Clearing A/c Cr
3. During Invoice Verification
Vendor A/c Cr
GR/IR Clearing A/c Dr
CENVAT Clearing A/c Dr
4. During Invoice Verification
Vendor A/c Cr
GR/IR Clearing A/c Dr
CENVAT Clearing A/c Dr
5. During Goods Issue to Production
Inventory A/c Cr
Consumption A/c Dr
6. During Goods Issue to Delivery
Inventory A/c Cr
COGS A/c Dr

Revolution: 4. Materials Management

Uploaded by

Copyright:

Available Formats

Revolution: 4. Materials Management

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Revolution: 4. Materials Management

Uploaded by

Copyright:

Available Formats

4 Materials

Sign-off on Business Blue Print on

Mr. Rakesh Aggarwal

Mr. Rajneesh Sharma Mr. Vivek Saluja

Methodology to be adopted for preparing Business Blue Print:

1 Material / Services Coverage and Procurement Types 8 9

0. Process Scope – List of Business Processes

4.4.4 GRN due to Stock Transfers

1. Material/Services Coverage & Different Types of Procurement

Procurement at SUNSTAR OVERSEAS LTD. covers the following items:

SUNSTAR OVERSEAS LTD. makes the following type of purchases:

Brief Explanation of the type of Purchase:

Plant 1 Plant 2 Plant 3 Plant 4

P.Org P.Org P.Org P.Org P.Org

SUNSTAR OVERSEAS LTD. requires

SUNSTAR OVERSEAS SUNSTAR OVERSEAS LTD. Pvt. Ltd.,

SUNSTAR OVERSEAS LTD. Pvt. Ltd., SUNSTAR OVERSEAS LTD.

S002 Packing Material Purchase, Sonepat

S005 Paddy Purchase, Haryana

6. SAP Business Process for SUNSTAR OVERSEAS LTD.

Existing Business Process Suggested Business Process

4.1.1 Sub-Process Scope: Maintenance of Material Master

Existing Business Process Suggested Business Process

Packing and consumable material etc. Materials are

Material group specifying the group of material it is raw

4.1.2 Sub Process Scope: Service Master Maintenance

Existing Business Process Suggested Business Process

Identification of Service item is done with the help of ACTIVITY

following data are to be maintained.

4.1.3 Sub Process Scope: Maintenance of Vendor Master

Existing Business Process Suggested Business Process

The schema group mentioned in the vendor master is useful in

4.1.4 Purchase Info Records

Existing Business Process Suggested Business Process

4.1.5 Source List Maintenance

Existing Business Process Suggested Business Process

material is done when a purchasing info record is created. Source

4.1.6 Maintain Vendor Evaluation Criteria

Existing Business Process Suggested business process

Business Requirement 2. Vendors shall be awarded scores for a number of different

like Price level, Price History, Goods Receipt, Quality Audit,

4.1.7 Sub-Process Scope: Maintenance of Conditions for Procuring Materials

Existing Business Process Suggested business process

Prices are maintained as gross price which is exclusive of Example :

purchase order. The buyer can then enter further conditions

Service tax is to be maintained as condition types.

Existing Business Process Suggested Business Process

Existing Business Process Suggested Business Process

Engineering & General Material Purchase department types exist:

Material Requirements Planning:- The main function of MRP

stocks and, in particular, the automatic creation of procurement

Consumption Based Planning:- Consumption-based planning is

Existing Business Process Suggested Business Process

4.3.1 Sub-Process Scope: Purchase Requisition

Existing Business process Suggested Business Process

Purchase requisitions are to be created manually and

4.3.2 Sub-Process Scope: Request for Quotation

Existing Business Process Suggested Business Process

SUNSTAR OVERSEAS LTD. wants Request for Example :