The SAP ERP Central Component (ECC) module's SAP MM (Materials Management) module gives businesses efficient materials, inventory, and warehouse management. Ensuring that materials are always stored in the correct quantities and that there are no shortages or gaps in the organization's supply chain is the main objective of SAP MM. It also helps supply chain professionals and other SAP users to complete the purchase of goods in a timely, cost effective way that enables them to manage day-to-day changes within those processes.
One of today's most significant problems facing organizations is material management. Through full control of the workforce, machines and materials SAP MM is helping organizations improve their supply chains, inventory and warehouse management. By implementing SAP MM, organizations can facilitate their production line, supply chain, and logistics to deliver materials to customers efficiently and cost-effectively.
SAP MM is part of the logistics function for SAP ECC, which has a key role to play in manufacturer's supply chains. It is integrated with other ECC elements such as Production Planning (PP), Quality Management (QM), Finance and Controlling (FICO), Plant Maintenance (PM), Sales and Distribution (SD) and Human Capital Management (HCM).
Support for SAP ECC is set to expire in 2025, which means that SAP B1 HANA will take its place. It’s not clear from SAP how the functions of MM will change to SAP Business One HANA, although the latest platform has components to address the key issues behind MM.
The SAP MM system includes several components integrated with each other. This integration allows each department to share information with others, so that data can be updated in real-time. SAP MM is categorized into five key components, with each of these components containing several sub-modules. Here are five of the main components of the SAP MM suite:
Consumption-based planning uses previous consumption values to forecast future requirements using statistical procedures. The major role of the MM-CBP component is to monitor stocks and automatically generate procurement proposals for production and purchasing. The proposal triggers when stock levels go below a pre-determined reorder point or by forecasting requirements using previous consumption values
The purchasing component ensures smooth communication among all participants in the procurement process, thereby ensuring that the purchasing unit of an organization functions seamlessly. The major tasks of the purchasing element are as follows:
The management of the external procurement of materials and services.Tracking deliveries from vendors.Monitoring payments to vendors.For the requirement, possible supply sources should be determined.This component encourages bid invitations, order/award placements, acceptance of services, and coordinating external services. It provides a platform for the management and coordination of external services. It encourages two types of external services:
Planned services where the nature and scope of the requirement are known at the beginning of the procurement stage.Unplanned services where the scope of the requirement is not available and the contract is subject to price limit.This component manages the following tasks:
Monitoring and managing material (physical) stocks based on quantity and value.Keeping the physical inventory of goods.Planning, entry, and documentation of the movement of all goods. Verification of invoices is a process that takes place at the end of the supply chain. Tasks such as purchasing, inventory management and verification of invoices are covered. This component helps in verifying incoming invoices related to prices, content, and quantity. This component adds the purchase invoice to the system after it has been sent by the vendor, and then passes this on to financial accounting and other materials management elements.
Here are some of the key features of SAP MM:
It manages both raw material management and inventory management.It ensures that there is no shortage of materials in the supply chain.It helps to enhance the efficiency of procurement activities.It accelerates productivity while minimizing overall procurement costs.It is responsible for managing various aspects of the business, such as the planning of the requirements, the evaluation of the vendor, the procurement, the validation of the material, the management of the warehouse and the verification of the invoices.Here are the two types of procurements in the SAP MM module:
The procedure of buying suitable materials and services in the proper quantities at the right time at the lowest prices is called basic procurement. The different steps in basic procurement are as follows:
Gathering informationThe procurement process begins with collecting details about a product and its quantity. Based on the number of required products, the module contacts the right suppliers.
Contacting suppliersDepending on the demand, the preferred suppliers fulfill the orders.
Rating products and servicesProducts and services are assessed on the basis of their performance by materials management team. The team contacts the same suppliers for repeat orders or contacts the new suppliers on the basis of the product rating.
Products that do not belong to the company are subject to special procurement. Special procurements and unique stocks are some of the common types.:
Consignment stocksThese are the materials that are available on the store premises. In order to use them, the vendor has to pay the vendor.
Third-party processingThe seller shall transmit orders to the vendor who will deliver that product straight to the customer.
Pipeline handlingThe seller shall keep the material in his place of business as soon as he has placed an order. The seller shall receive the material from the vendor and deliver it to the customer as soon as a customer place an order.
An effective and inclusive method of managing supply chain activities and guaranteeing the proper products are accessible when needed is through SAP MM's procurement procedure. It includes activities like the creation of purchase requisitions, the selection of vendors, the ordering of materials, the receipt of goods and the verification of invoices to improve communication and collaboration between suppliers, vendors, and customers.
Here are the key steps of the procurement process in SAP Material Management:
First, the user identifies the material required and contacts the right suppliers.The user generates a purchase request, which is converted to a purchase order.A purchase order is sent to the vendor, and goods are delivered to the organization.The goods receipt is recorded, and the invoice is verified.The vendor delivers the product directly to the customer.Businesses can ensure a smooth management of their supply chain by understanding the procurement process in SAP MM and smoothly integrating all activities within it, thereby meeting customer needs.
The ability of an organization to respond quickly to market needs is determined by the change in customer demands and expectations. The company has to keep a proper stock at the appropriate time so that products can be delivered smoothly. Having a capable material management process helps to prevent supply gaps and shortages of inventory and raw materials and improve the supply chain’s efficiency. SAP MM automates material management and procurement activities, making the entire process more capable. Here are some of the major benefits of SAP MM:
Improves overall inventory management.Reduces and eliminates inventory losses.Minimizes the amount of time and labor needed to maintain a stock.Reduces material waste by avoiding stocking obsolete or unnecessary products.Decreases labor costs and optimizes labor employment.Reduces manufacturing cycle times.Minimizes expenditure on storing unwanted materials.Enhances product delivery time.Increases the transparency of inventory management.Are you looking for SAP implementation? Let us contact with SAP partner company Zyple Software!