Define Valuation Level

The valuation level is an important configuration step because it specifies the level at which material stocks are valuated for the whole client.

• Depending on the valuation level chosen, accounting data (in particular the valuation price) is maintained for each plant or for each company code in the material master record.
• If material stocks are valuated at company code level, all plant stocks of a material are managed in a joint stock account for each company code.
• If material stocks are valuated at plant level, the material stocks for each plant can be managed in different accounts. We can define a separate account determination for each plant

Menu Path: Implementation Guide for R/3 Customizing (IMG) -> Enterprise Structure -> Definition -> Logistics general -> Define Valuation Level

or

Transaction Code: OX14

Important

Once set, it is not possible to switch the valuation level from plant to company code, or vice versa. If absolutely necessary to subsequently change the valuation level, contact your SAP consultant because a data conversion is required.

 

Step 1. Click at execute button execute

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Step 2. Choose the appropriate valuation level as you business requirement

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Define Plant

Plant
As a part of the Logistics Organizational Structure, Plants are defined in SAP. The ‘Plant’ is an operating area or a branch or a location within a company. Each ‘Plant’ is assigned to a single ‘company code’. A ‘company code’ can have several ‘Plants’.

Before setting up new plant, certain other settings need to be defined:

Factory calendar
A factory calendar identifies the workdays, public holidays, and company holidays. The SAP system is delivered with some factory calendars, but a new factory calendars can be configured on a companys schedule.

Country Key
A country key is required to define a plant. The system is delivered with country keys, and new country codes need to be configured if athey are not in the system.

Region Keys
A region code is required along with the country code. The region is defined as a state or province associated with a country

Create a new plant
A four-character string defines the plant field.

Menu path : Implementation Guide for R/3 Customizing (IMG) -> Enterprise Structure -> Definition -> Logistics general -> Define, copy, delete, check plant.

 

 

Step 1 . Go to SPRO
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Step 2. Double click at Define Plant
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Step 3.  Click at New Entries button
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Step 4.  Key in your new Plant here. Afterwards click at save icon to apply your new configuration.
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Organizational Structure in Procurement Process

MM Structure Organization

Client
The client is a unit within an SAP system that is self-contained both in legal and organizational terms and in terms of data, with separate master records and an independent set of tables. From a business viewpoint, the client represents a corporate group, for example.

The client is the highest hierarchical level in the SAP system. Specifications or data that you make and enter at this level apply to all company codes and all other organizational units. Therefore, you do not have to enter the specifications and data at client level more than once in the system. This ensures a uniform data status.

Access authorization is assigned on a client-specific basis. A user master record must be created for every user in the client in which he or she wishes to work. If the Client field has not been prepopulated, each user must specify a client key when logging onto an SAP system. In this way, the user specifies the client in which he or she wishes to work. All user input is stored, separated by client.

The processing and evaluation of data is likewise carried out on a client-specific basis. A client is uniquely defined in the system by a three-digit numeric key.

Company Code
The company code is the smallest organizational unit of external accounting for which a complete, self-contained bookkeeping system can be replicated. This includes the entry of all events that require posting to the accounts and the creation of a complete audit trail for balance sheets and profit and loss statements.

A company code represents an independent unit producing its own balance sheet, for example, a company within a corporate group (client).

You can set up several company codes in one client in order to thus keep separate sets of financial books. You can use a special Customizing function to copy a company code. In the process, company-code-dependent specifications are adopted for your new company code.

A company code is defined in the system by means of a four-character alphanumeric key that is unique in the client.

Plant
The definition of a plant depends on its use. From a materials-management view a plant can be defined as a location that holds valuated stock.

A plant may represent a variety of entities within a firm, such as:
•    – Production facility
•- Distribution center
– Regional sales office
•    – Corporate headquarters
•- Maintenance location

When creating a new plant, you can use the plant copy function. In the process, all entries in the plant table and all Customizing and system tables that depend on it, and in which the plant occurs as the key, are taken into account.
A plant is defined in the system by means of a four-character alphanumeric key that is unique in the client.

Storage Location
The storage location is an organizational unit that facilitates the differentiation of stocks of materials within a plant. Inventory management on a quantity basis is carried out in the plant at storage location level. The physical inventory is also carried out at this level.
A storage location is defined by means of a four-character alphanumeric key that is unique in the plant.

Purchasing Group
A purchasing group is a key for a buyer or a group of buyers who is/are responsible for certain purchasing activities. Internally, the purchasing group is responsible for the procurement of a material or class of materials.
Externally, it is the principal channel for an enterprise’s dealings with its vendors. The purchasing group is not aligned to other units in the company structure.

Purchasing Organization
The purchasing organization is an organizational unit within logistics that subdivides the enterprise according to the purchasing requirements. A purchasing organization procures materials or services, negotiates conditions of purchase with vendors, and assumes responsibility for these transactions.

You can incorporate purchasing into the company structure by assigning the purchasing organization to a company code and to plants. This means that you can take into account whether purchasing is organized on a centralized or decentralized basis in your company. You can have a combination of these two organizational forms.

You can assign several purchasing organizations to one company code. However, a certain purchasing organization can only belong to one company code. You can decide not to assign the purchasing organization to a company code (cross-company-code purchasing).
There is an m:n relationship between purchasing organizations and plants. In other words, you can assign several plants to one purchasing organization, and one plant to several purchasing organizations.

The different assignment options between company code, plant, and purchasing organization yield the following “categories” of purchasing organization.
In plant-specific procurement, a purchasing organization is responsible for procuring materials for just one plant.

 

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External Procurement Process

The external procurement of materials is based on a cycle of general activities. In detail, a typical procurement process includes the following phases:

External Procurement Cycle

Requirements Determination: The responsible user department can manually pass a requirement for materials to the Purchasing department via a purchase requisition. If you have set a MRP procedure for a material in the material master, the SAP system automatically generates a purchase requisition.

Source Determination: As a purchaser, you are supported during determination of possible sources of supply. You can use determination of the source of supply to create requests for quotation (RFQs) and then enter the quotations. In addition, you can refer to purchase orders, contracts and conditions that already exist in the system.

Vendor selection: The system simplifies the selection of vendors by making price comparisons between the various quotations. It automatically sends rejection letters.

Order Processing: Similar to purchase requisitions, you can create purchase orders manually or have them created automatically by the system. When you create purchase orders, you can copy data from other documents, such as purchase requisitions or quotations, to reduce the amount of entry work
required. You also have the option of working with outline agreements.

Order Monitoring: You can monitor the processing status of the purchase orders in the system. You can also determine, for example, whether a delivery or an invoice for a purchase order item has been entered. You can remind the vendors of outstanding deliveries.

Goods receipt: When you enter incoming deliveries in the system, you refer to the relevant purchase order. The amount of entry work is therefore minimized, and you can check whether the delivered goods and quantities match the purchase order. The system also updates the purchase order history of the purchase order.

Invoice verification: When entering invoices, you refer to the previous purchase order or delivery so you can check the calculations and the general accuracy of the invoice. The availability of the purchase order and goods receipt data enables you to refer to the quantity and price variances.

Payment processing: The payment program authorizes payment to the creditor liabilities. Financial Accounting executes this program regularly.

Material Management as Part of Logistics

Logistics can be defined as the management of business operations, including the acquisition, storage, transportation, and delivery of goods along the supply chain. The supply chain can be defined as a network of retailers, distributors, forwarder, storage facilities, and suppliers that participate in the sale, delivery, and production of particular product.

From these definitions it is clear that materials managements is an integral part of the logistics function within SAP. There are three flows that are important when we look at MM in the supply chain. These are:
– The material flow
– The information flow
– The financial flow

The material flow describes the movement of materials from the vendor to the company and then on to the customer. Today companies are integrating with suppliers and customers, not just interfacing. Therefore any improvements companies can provide to the visibility of their material flow will allow them to be flexible and responsive to their customers. Customers will want to do business with companies who are responsive. Those companies will also be able to gain a competitive advantage and increase market share by being more flexible , quicker, more dependable.

The information flow includes the transmitting of orders (including EDI,fax,etc) and updating the status of all deliveries. Companies that can show customers and vendors viability by using real time information have a distinct competitive advantage over others.

The financial flow includes the accounting documents that are created at each material movement .

How does SAP help clients to manage this supply chain to gain a competitive advantage?

SAP R/3 software provides a company with the ability to have the correct materials at the correct time, with the correct quantity at the most quantitive cost. The competitive advantage is achieved when the company can manage the process. This involves managing the company’s relationship with its vendors and customers, it also involves controlling their inventory, forecasting customer demand, and receiving timely information with regards to all aspects of the supply-chain transactions.

When we break this down and look at the modules involved in the management of the supply chain, we can see that although materials management is an integral part of logistics, it is only part of the big picture.

The Logistics function in SAP includes the following:
Material Management (MM)
Sales and Distribution (SD)
Quality Management (QM)
Plant Maintenance (PM)
Production Planning (PP)
Project System (PS)
Finance (FI)
Warehouse Management (WM)
Logistics Information System (LIS)

There is additional functionality in the Logistics area, such as Batch Management, Handling Unit Management, Variant Configuration Engineering Change Management, Environmental, Health, and Safety (EHS). These can be important in the Logistics area, depending on the individual customer requirements.

Main SAP Functionality

SAP was originally developed as an enterprise application-software package that was attractive to very large manufacturing companies. As the number of companies adopting SAP began to grow, a number of smaller companies in many different industries came to believe that SAP was the product that could give them a competitive advantage.

Many of these companies required just the core of SAP functionality. That usually comprises FI, MM,SD, and PP. Often companies would start their implementations with this core functionality and then on the second hand and third phases of their implementations they would introduce functionality such as CO, WM, HR,etc.

With the advent of distributed client–server computing SAP AG brought out a client–server version of the software called SAP R/3 (the “R” was for “Real-time data processing” and “3” was for “3-tier”: 1) database, 2) application server, and 3) client (SAPgui)). This new architecture is compatible with multiple platforms and operating systems, such as Microsoft Windows or UNIX. This opened up SAP to a whole new customer base.

SAP R/3 was officially launched on 6 July 1992. Various releases of the software were made through the 90s.

A newer version of the software, with new architecture, was released in 2003–2004, renamed as SAP ERP. ECC is a version name for SAP ERP,(ERP Central Component). Other SAP Implementations can be customized products can function on the central component. SAP came to dominate the large business applications market over the next 10 years. SAP ECC 5.0 ERP is the successor of SAP R/3 4.70. The newest version of the suite is SAP ERP 6.0, Enhancement Pack 7.

Here is the complete list of SAP release version:

SAP release versions:SAP R/1, System RF: 1972
SAP R/2, ran on a mainframe architecture: 1979
SAP R/3 Enterprise Edition 1.0 A: July 1992
SAP R/3 Enterprise Edition 2.0: 1993
SAP R/3 Enterprise Edition 3.0: 1995
SAP R/3 Enterprise Edition 4.0 B: June 1998
SAP R/3 Enterprise Edition 4.3
SAP R/3 Enterprise Edition 4.5 B: March 1999
SAP R/3 Enterprise Edition 4.6 C: April 2001
SAP R/3 Enterprise Edition 4.6 F
SAP R/3 Enterprise Release 4.70: March–December 2003[2]
SAP R/3 Enterprise Edition 4.7
SAP R/3 Enterprise Central Component (ECC) 5.0: 2004
SAP R/3 Enterprise Central Component (ECC) 6.0: October 2005 – June 2006
SAP ERP 6.0: Enhancement Packages (1, 2, 3, 4, 5, 6, 7)
SAP S/4 HANA

As SAP develops more extensive solutions and tools for its customers, Material Management continues to be an important part of foundation on which subsequent functionality is built.

What is SAP ?

SAP is the acronym for Systems, Applications, Products. It is an ERP system that provides users with a soft real-time business application. It was founded in 1972 by five former IBM employees in Mannheim, Germany and now a market and technology leader in supply chain and procurement software.

top-five-vendors-and-market-shares-for-supply-chain-management-2014

data-table

SAP grew the fastest of the top five vendors, achieving 19.9% growth from 2013 to 2014

growth-rate-comparison

Source: Forbes

It provides comprehensive solutions for companies of all sizes and all industry sectors. SAP is number-one vendor of standard business-application software and the third largest software supplier in the world. SAP delivers scalable solutions that enable its customers to further advance industry best practices. SAP is constantly developing new products that allow their customers to respond to dynamic market conditions and help them maintain competitive advantage.

In 1979, SAP released its mainframe product called R/2, Materials Management was a core module of this release. SAP dominated the German market, and in the 1980s SAP developed a broader market in the rest of Europe. In 1992, SAP developed the client/server application that we all know now as R/3. This allowed SAP to bring the software to the US market and within few years SAP become the gold standard for ERP software.

When business choose SAP as their enterprise application software, they identified the integration of the modules as a key advantage. Many other software companies used a best-of-breed approach and developed highly complex interfaces to integrate the separate software packages. Supporting and maintaining just one system rather than several systems with different hardware platforms has yielded a significant cost saving for companies.