Valuation

Valuation

Procurement process starts with creating purchase order and ends with invoice verification. In the whole process one of the important parts is material valuation. In procurement process while creating purchase orders material price is a mandatory field and it is automatically determined. This happens because material valuation is maintained in SAP system in material master. Material valuation represents integration between MM & FI (Financial Accounting) modules since it updates the general ledger accounts in financial accounting. The key points about material valuation are as follows.

• Material valuation helps to determine the price of material and for which general ledger account it needs to be posted in financial accounting.
• Material valuation can happen at company code level or plant level.
• Material can be valuated based on different types of procurement and this is known as split valuation. Normally split valuation is used to valuate material in same valuation area (company or plant) differently. Split valuation is described in detail in below context.

Split Valuation

Split valuation enables you to valuate stocks of a material in the same valuation area (company or plant) differently. Some of the examples where split valuation is required are as follows.

• Stock that is procured externally from vendor has a different valuation price than the stock of in-house production.
• Stock obtained from one vendor is valuated at a different price than stock obtained from another vendor.
• Same material having different batch may have different valuation prices.

Split Valuation needs to be activated before setting any other configuration. Split valuation can be activated by following the below steps.

Path to Activate Split Valuation:

IMG => Materials Management => Valuation and Account Assignment => Split Valuation => Activate Split Valuation

TCode: OMW0

On Display IMG screen select Activate Split Valuation execute icon by following the above path.

Select Split material valuation active tab. Click on save. Split valuation is now activated.

Some important terms under split valuation are as follows.

• Valuation Area: Material may be valuated at plant level or at company code level. The level at which materials are valuated is known as valuation area.
• Valuation Category: Valuation category is the criteria on which material is split valuated.
• Valuation Type: Valuation type specifies the features of a valuation category.

Split valuation configurations like defining valuation category, valuation type are described in below context.

Split Valuation Configuration

Split valuation configurations like defining valuation category, valuation type can be done by following the below steps.

Path to Configure Split Valuation:

IMG => Materials Management => Valuation and Account Assignment => Split Valuation => Configure Split Valuation

TCode: OMWC

On Display IMG screen select Configure Split Valuation execute icon by following the above path.

Select Global Types tab to create valuation type.

Select Create icon.

Provide name of valuation type. Click on save. A new Valuation Type will be created.

Now go to same screen and select Global Categories tab to create valuation category.

Select Create icon.

Provide name of valuation category. Click on save. A new Valuation Category will be created.

Now go to same screen and select Local Definitions tab to map valuation type and valuation category.

Select Cats. -> OU tab.

Provide valuation type, valuation category and set status as active and then select Activate tab. Valuation category and valuation type are now mapped and both are activated.

After maintaining valuation type and valuation category you can mention them in material master as shown below.

Go to mm02(Change screen for material master). Here you can maintain the valuation category and valuation class in accounting view. On this basis material will be valuated in a purchase order.

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Source Determination-List

The combined information of material and vendor altogether is kept in a record that is known as purchase info record. But a particular material can be ordered from different vendors in different time intervals. This information can be maintained in a list that is called as source list. The key points about source list are as follows:

• Source list include list of possible sources of supply for a material over a given framework of time.
• Source list specifies the time period of ordering of a particular material from a given vendor.
• Source list can be copied from one plant to another plant.

Source list can be created by following two ways:

• Automatically
• Manually

Automatic Creation of Source List

Source list can be automatically created by doing some setting in material master. Automatic source list can be created by following the below steps.

Go to MM02(Edit mode of material master for which you want to create source list automatically). Select all the views.

In purchasing view check the box for source list. Click on save. Source list will be created automatically for the material.

Manual Creation of Source List

Source list can be created manually by following the below steps:

Path to maintain Source list:

Logistics => Material Management => Purchasing => Master Data => Source List => Maintain

TCode: ME01

On SAP Menu screen select Maintain execute icon by following the above path.

Enter the material number for which you want to maintain source list and respective plant details.

Fill in all necessary details like valid periods, name of vendor, purchasing organization. Click on save icon. Source list for the material is now maintained.

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Service Management

Service Management

Every organization acquires goods to complete its business needs. Besides these goods procurement, an organization may require occasionally some kind of services. These services will include small maintenance task like changing the lights, painting and housekeeping. These services are carried out by external contractors and hence the whole process of procurement of services is known as service management. The key points about service management are as follows.

• Services are meant for direct consumption instead of keeping them in inventory.
• Service description along with unit of measure is stored as master data in a record that is known as service master record.
• System stores the services that have been procured as a record in a sheet called as service entry sheet.
• Service procurement is of following two types:
• Planned Services - In planned services at the time of procurement specifications like quantity and price are known in advance. It means nature and scope of service is clear before procurement.
• Unplanned Services - In unplanned services at the time of procurement specifications like quantity and price are not known in advance. It means nature and scope of service is not clear before procurement. These services can be extended as per the requirement.

Service management deals with the following terms which are as follows.

• Service Master Record
• Service Purchase Order
• Service Entry Sheet

Service Master Record

Service master record contains the detail of all the services that can be procured from external vendor within an organization. Service master record contains description of services along with the unit of measure. This master record serves as a reference for creating service purchase order but it is not necessary, service purchase order can also be created manually without reference. Service master record can be created by following the below steps.

Path to Create Service Master Record:

Logistics => Materials Management => Service Master => Service => Service Master

TCode: AC03

On SAP Menu screen select Service Master execute icon by following the above path.

Select Create New Service icon as shown below.

Fill in all necessary details like service category, base unit of measure, valuation class. Click on save. A new Service will be created.

Service Purchase Order

In SAP MM services are accomplished with the help of service purchase order. The requirement of service with its description along with quantity is given to third party in form of service purchase order. In service purchase order important field is item category. For service, item category will be D. So, service purchase order can be created by following the below steps.

Path to create Purchase Order:

Logistics => Materials Management => Purchasing => Purchase Order => Create => Vendor/ Supplying Plant Known

TCode: ME21N

Service Item Category: D

On SAP Menu screen select Vendor/ Supplying Plant Known execute icon by following the above path.

Provide all necessary details like name of vendor, item category, name of material, plant for which material is procured and date of delivery. Click on save. Service Purchase order will be created.

Service Entry Sheet

System stores the services that have been procured as a record in a sheet called as service entry sheet. In case of services instead of creating goods receipt document we will create service entry sheet. Service entry sheet will accommodate the charges that we need to pay to the vendor. Service entry sheet can be created by following the below steps.

Path to create Service Entry Sheet:

Logistics => Materials Management => Service Entry Sheet => Maintain

TCode: ML81N

On SAP Menu screen select Maintain execute icon by following the above path.

Provide all necessary details like purchase order number, service number, quantity, price. Click on save. A new Service Entry Sheet will be created for the corresponding purchase order.

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Screen Navigation

The first step to understand SAP is to have basic knowledge of screens like Login screen, Logout screen and so on. Following screens will describes about the screen navigation and the functionalities of standard tool-bar.

Login Screen

Log on to SAP ERP server. SAP login screen will prompt for User ID and Password. Provide the valid user ID and Password and press enter. The user id and password is provided by system administrator. Following is the login screen:

Standard Tool-bar Icon

SAP screens tool-bar are shown in the following image:

SAP screen tool-bars are briefly described as:

• Menu Bar - Menu bar is the top line of dialog window in the SAP system.
• Standard Toolbar - Standard functions like save, top of page, end of page, page up, page down, print, etc. are available in toolbar.
• Title Bar - Title Bar displays the name of the application/business process you are currently in.
• Application Toolbar - Application specific menu options are available on this toolbar.
• Command Field - To start a business application without navigating through the menu transaction, some logical codes are assigned to the business processes. Transaction codes are entered in the command field to directly start the application.

Standard Exit Keys

Exit keys are used to exit the module or to log off. They are used to go back to the last accessed screen. Following are the standard exit keys used in SAP:

New Session Icon

For creating a new session we use the following keys shown in the below image:

Log Off

It is a good practice to log off from the SAP system when you finish your work. There are several ways of login off from the system but it can be done using following instructions as shown in image:

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Request for Quotation

Vendor selection is an important process in procurement cycle. Once requirements are gathered we will look for possible suppliers who can fulfill the requirements at the best possible price. So a request is made to vendors to submit their quotations indicating the price of material along with their terms and conditions. This request is known as request for quotation. The key points about request for quotation are as follows:

• Request for quotation is a form of invitation that is sent to vendors to submit quotation indicating pricing and their terms and conditions.
• RFQ contains details about goods or services, quantity, date of delivery and date of bid on which it is to be submitted.
• Quotation is a reply by a vendor in response to request for quotation.

RFQ can be created by following two ways:

• Manually
• Automatically from Purchase Requisition

Manual Creation of RFQ

RFQ can be created manually by following the below steps:

Path to create RFQ:

Logistics => Materials Management => Purchasing => RFQ/Quotation => Request for Quotation => Create

TCode: ME41

On SAP Menu screen select Create execute icon by following the above step.

Fill in all required details like type of RFQ (if standard then AN), language, date of RFQ, purchasing organization and group.

Provide the name of material, quantity of material, material group and quotation deadline date.

Provide the quantity and delivery date for the material.

Provide the vendor address (street number, city, country, pin code) to which you are addressing the RFQ. Click on save. A new Request for Quotation will be created.

Automatic Creation of RFQ from Purchase Requisition

RFQ can also be created with reference to purchase requisition by following the below steps:

On the home screen of RFQ select Reference to PReq tab.

Enter the requisition number for which you want to create RFQ. Click on save. A new Request for Quotation will be created with reference to Purchase Requisition.

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