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SAP MM (Materials Management) is one of the core functional modules of SAP ERP and SAP S/4HANA. It plays a crucial role in managing an organization’s procurement activities, inventory management, and material valuation. SAP MM ensures that materials are available in the right quantity, at the right time, and at the right cost, thereby supporting smooth business operations and effective supply chain management.
SAP MM focuses on the procurement and management of materials required for production and day-to-day operations. It integrates closely with other SAP modules such as SAP SD (Sales and Distribution), SAP PP (Production Planning), SAP FI (Financial Accounting), and SAP QM (Quality Management). This integration allows real-time data flow across departments, reducing redundancy and improving decision-making.
The primary objective of SAP MM is to optimize material procurement and inventory processes while minimizing costs and ensuring uninterrupted supply.
SAP MM is broadly divided into several sub-components, each responsible for a specific business function:
Procurement is the process of acquiring goods and services from external vendors. SAP MM supports both external procurement (purchasing from vendors) and internal procurement (stock transfers between plants).
Key activities include:
Purchase Requisition (PR)
Request for Quotation (RFQ)
Vendor Selection and Quotation Comparison
Purchase Order (PO) creation
Goods Receipt (GR)
Invoice Verification (IV)
These steps ensure a controlled and transparent purchasing cycle.
Inventory Management deals with the physical movement of goods and tracking stock quantities and values. SAP MM provides real-time visibility of inventory levels, enabling businesses to avoid overstocking or stock shortages.
Inventory management functions include:
Goods Receipt
Goods Issue
Stock Transfer
Physical Inventory
Stock Types (Unrestricted, Blocked, Quality Inspection)
Accurate inventory data helps organizations plan production and sales effectively.
The Material Master is the central data repository in SAP MM. It contains all information related to a material, such as description, unit of measure, valuation, and storage data.
Views in Material Master include:
Basic Data
Purchasing
MRP (Material Requirement Planning)
Accounting
Storage Location
Proper maintenance of material master data is essential for accurate procurement and inventory processes.
Vendor Master Data stores information about suppliers, including name, address, payment terms, and bank details. This data is shared across modules like FI and MM to ensure consistent financial and procurement transactions.
In SAP S/4HANA, vendor and customer master data are replaced by Business Partner (BP) concepts, simplifying master data management.
One of the biggest strengths of SAP MM is its seamless integration with other SAP modules:
SAP FI: Automatic accounting postings during goods receipt and invoice verification.
SAP SD: Inventory reduction during sales order delivery.
SAP PP: Material consumption during production.
SAP QM: Quality inspection during goods receipt.
This tight integration ensures data consistency and real-time financial impact tracking.
SAP MM supports different pricing procedures and valuation methods to control material costs. Two commonly used valuation methods are:
Moving Average Price (MAP)
Standard Price
The system automatically updates material values during goods movements and invoice postings, helping organizations maintain accurate financial records.
SAP MM provides standard reports to monitor procurement and inventory performance. These reports help track:
Stock levels
Vendor performance
Purchase order status
Material consumption
With SAP S/4HANA, advanced analytics and embedded reporting using Fiori apps and SAP Analytics Cloud further enhance decision-making capabilities.
Implementing SAP MM offers several advantages:
Improved procurement efficiency
Better inventory control
Reduced operational costs
Real-time data visibility
Enhanced compliance and audit readiness
These benefits make SAP MM a vital module for organizations across industries.
SAP MM is a highly demanded skill in the SAP job market. Professionals can work as SAP MM Consultants, Business Analysts, or Functional Leads. Roles involve system configuration, business process mapping, end-user training, and support.
Knowledge of business processes, integration points, and hands-on configuration is essential for a successful SAP MM career.
SAP MM is a powerful and essential module within the SAP ecosystem that manages procurement and inventory processes efficiently. Its strong integration with other modules, robust master data management, and real-time reporting capabilities make it indispensable for modern enterprises. Whether for operational efficiency or strategic decision-making, SAP MM plays a key role in achieving effective supply chain and materials management.
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SAP MM (Materials Management) is a core SAP module used to manage procurement, inventory, and material valuation.
It helps organizations control material flow, reduce costs, and ensure timely availability of materials.
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Main functions include:
Procurement of materials
Inventory Management
Material Master Data Management
Vendor Management
Invoice Verification
Material Valuation
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Material Master is a central database that stores all information related to a material, such as description, unit of measure, price, and storage details.
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Important views are:
Basic Data
Purchasing
MRP
Accounting
Storage Location
Sales (if integrated with SD)
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Procurement is the process of purchasing goods or services from vendors to meet business requirements.
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External Procurement – Buying from vendors
Internal Procurement – Stock transfer between plants
Subcontracting – Vendor manufactures using company materials
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A Purchase Requisition is an internal document requesting the purchase of materials or services.
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A Purchase Order is a legal document sent to a vendor specifying quantity, price, and delivery details.
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Standard PO
Subcontracting PO
Consignment PO
Stock Transport Order (STO)
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Vendor Master contains all vendor-related information, such as address, payment terms, and bank details.
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General Data
Company Code Data
Purchasing Organization Data
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Inventory Management handles stock levels, goods movement, and stock valuation.
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Goods Receipt is the process of receiving materials into inventory against a PO.
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Goods Issue refers to issuing materials from stock for consumption or delivery.
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Invoice Verification is the process of matching vendor invoices with PO and GR details before payment.
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Movement Type controls how stock is updated in inventory (e.g., 101 for GR, 201 for GI).
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MRP ensures materials are available on time by planning procurement and production.
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A Plant is a physical location where materials are stored, produced, or maintained.
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Storage Location is a sub-division of a plant where materials are physically stored.
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A Purchasing Organization is responsible for procurement activities and negotiating prices.
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A Purchasing Group is a person or team responsible for purchasing activities.
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Valuation Area determines how material prices are maintained (plant level or company code level).
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Price Control determines material pricing:
Standard Price (S)
Moving Average Price (V)
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Standard Price remains fixed and variances are posted to price difference accounts.
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Moving Average Price changes based on each goods receipt.
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Account Determination defines which G/L account is posted during material transactions.
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Goods Movement refers to any stock change, such as GR, GI, or transfer posting.
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Stock Transfer is moving material between plants or storage locations.
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Batch Management is used to track materials with batch numbers, especially in pharma and food industries.
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It tracks individual items using serial numbers.
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Consignment Stock is vendor-owned stock kept at the company premises.
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In Subcontracting, materials are sent to a vendor, who manufactures the final product.
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Release Strategy is an approval process for PRs and POs.
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Source List specifies approved vendors for materials.
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A Quotation is a price proposal received from vendors.
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RFQ is sent to vendors asking for pricing and delivery details.
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GR/IR is a clearing account used during Goods Receipt and Invoice Receipt.
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Physical Inventory is the process of counting actual stock and matching it with system stock.
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Material Valuation determines how material stock value is calculated.
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SAP MM integrates with:
FI – Accounting and payments
SD – Sales and delivery
PP – Production planning
WM/EWM – Warehouse management
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Automatic PO is created automatically by MRP when requirements exist.
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Special Stock is stock not owned directly by the company (e.g., consignment, subcontracting).
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Stock types include:
Unrestricted Stock
Quality Inspection Stock
Blocked Stock
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Company Code is the legal entity for which financial statements are created.
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T-Code (Transaction Code) is a shortcut used to access SAP screens (e.g., ME21N, MM01).
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ME21N is used to create a Purchase Order.
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MM01 is used to create Material Master.
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MIRO is used for Invoice Verification.
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MIGO is used for Goods Receipt and Goods Issue.
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SAP MM helps companies:
Reduce procurement cost
Avoid material shortages
Maintain accurate inventory
Improve operational efficiency
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The end-to-end procurement cycle includes:
Purchase Requisition (PR) – Created manually or via MRP
Source Determination – Source list / info record
RFQ & Quotation – Price comparison
Purchase Order (PO) – Created and approved
Goods Receipt (GR) – Stock updated (MIGO)
Invoice Verification (IV) – Vendor invoice posted (MIRO)
Payment Processing – Handled in FI
This cycle ensures accurate procurement and financial posting.
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SAP MM integrates with FI during:
Goods Receipt → Inventory account & GR/IR account
Invoice Receipt → Vendor account & GR/IR clearing
Price differences → Price difference account
Consumption posting → Cost center or asset
Account Determination (OBYC) controls these postings.
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Account Determination defines which G/L accounts are posted for MM transactions.
Key components:
Valuation Class
Chart of Accounts
Transaction Keys (BSX, WRX, PRD, GBB)
Configured using OBYC.
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| Standard Price (S) | Moving Average Price (V) |
|---|---|
| Fixed price | Changes with each GR |
| Variances posted to PRD | No variance account |
| Used in manufacturing | Used in trading |
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At GR (movement type 101):
Inventory Account → Debited
GR/IR Account → Credited
Stock quantity and value increase.
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At IR:
GR/IR Account → Debited
Vendor Account → Credited
Any price difference is posted to PRD (if standard price).
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GR/IR clearing ensures matching between:
Goods Receipt
Invoice Receipt
Open GR/IR occurs when:
GR done, invoice pending
Invoice done, GR pending
Cleared automatically when both match.
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Price differences depend on price control:
Standard Price → Posted to PRD account
Moving Average → Adjusts material price
Tolerance limits are set in OMR6.
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Common MRP Types:
PD – Standard MRP
VB – Manual reorder point
ND – No planning
V1/V2 – Automatic reorder point
Defined in material master (MRP view).
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Without STO → One-step or two-step transfer (301, 311)
With STO → Inter-company or intra-company with PO
STO provides better tracking and accounting.
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Release Strategy ensures PO/PR approval.
Steps:
Define characteristics (CEBAN/EKKO)
Define class and release groups
Assign release codes
Create release strategy
Assign to document type
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Subcontracting involves:
Creating subcontracting PO (item category L)
Sending components to vendor (541 movement)
Receiving finished goods (101 movement)
Components are consumed automatically.
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In Consignment:
Stock remains vendor-owned
No accounting entry at GR
Accounting entry only when material is withdrawn (411K)
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Split Valuation allows material valuation based on:
Origin
Quality
Usage
It uses valuation types under one material number.
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Used in pharma/food industries to track expiry, quality, and origin.
Each batch has a unique batch number and characteristics.
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Special Stocks include:
Consignment (K)
Subcontracting (O)
Pipeline (P)
Sales Order Stock (E)
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Steps:
Create PI document
Enter count
Post differences
Differences are posted to inventory gain/loss account.
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101 – GR for PO
102 – GR reversal
201 – GI to cost center
261 – GI to production order
301 – Plant to plant transfer
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Enabled via:
MRP settings
Source list
Info record
Automatic PO indicator in plant parameters
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Material Ledger provides:
Actual costing
Multiple currency valuation
Price determination at period-end
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Reservation is internal stock requirement,
PR is for external procurement.
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Check:
PO quantity/value
Tolerance limits
Account determination
Movement type configuration
Stock status
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Info Record stores purchasing data between vendor and material:
Prices
Delivery time
Conditions
Types: Standard, Subcontracting, Consignment.
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Valuation Class is derived from:
Material Type
Account Category Reference
Used for inventory posting.
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IM manages quantity/value,
WM/EWM manages bin-level storage and logistics.
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Duplicate invoices are prevented using:
Reference number check
Vendor invoice tolerance
Duplicate invoice configuration
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Tax is determined via:
Condition types
Tax codes
Country-specific procedures (e.g., GST in India)
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Set deletion indicator
Close delivery complete
Archive old POs
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Used for non-material services with:
Service master
Service entry sheet
Valuation at entry
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Typical challenges:
Incorrect account determination
GR/IR mismatches
Price variance issues
User errors in MIGO/MIRO
Integration issues with FI/PP
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Open PO upload
Stock upload
Vendor open balances
Price verification
User training
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Involves:
Two company codes
Inter-company billing
FI integration
Used for inter-company material movement.
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Source determination
Automatic PO
Release strategy
Vendor evaluation
MRP optimization
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ME2N – PO list
MB52 – Stock overview
ME5A – PR list
MRBR – Blocked invoices
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I bring strong understanding of:
End-to-end MM processes
Real-time issue resolution
Integration with FI/PP/SD
Business-oriented solutions
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Split valuation allows valuation of the same material differently.
Steps:
Activate split valuation (OMWC)
Define valuation categories (OMW1)
Define valuation types (OMW2)
Assign valuation category to material type
Maintain valuation type in material master
Example:
Raw material valued as imported and domestic.
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Valuated GR: Stock value updates and accounting document created
Non-Valuated GR: Only quantity updates (used in consignment)
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Tolerance limits control allowable variances during procurement.
Configured via:
OMR6 – Price & quantity tolerances
OMT3E – GR tolerances
Helps prevent overbilling and excess receipts.
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System derives G/L account using:
Chart of accounts
Valuation grouping code
Valuation class
Transaction key (BSX, WRX, GBB, PRD)
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GBB is used for offsetting entries.
Common modifiers:
VBR – Consumption to cost center
VBO – Consumption to order
BSX – Inventory posting
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Item not considered for GR/IR
History remains
No further procurement possible
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Material determination allows replacement materials during procurement using substitution rules.
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Invoices get blocked due to price/quantity variance.
Resolved via MRBR after review.
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ERS auto-creates invoices during GR without vendor invoice.
Used when:
Prices are fixed
Trusted vendors
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| Scheduling Agreement | Contract |
|---|---|
| Delivery schedule | No schedule |
| Frequent deliveries | Long-term agreement |
| Used in production | Used in services |
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Contract – Value/quantity based
Scheduling Agreement – Time-based deliveries
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Configure supplying & receiving plants
Assign delivery type
Enable inter-company billing
Assign pricing procedure
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One-step: Direct transfer (movement 301)
Two-step: Issue (303) + receipt (305)
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Negative stock allows issuing material without stock.
Used in:
High-volume warehouses
Retail environments
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Vendor evaluation measures vendor performance based on:
Price
Delivery
Quality
Service
Configured via ME61.
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Invoice matched against service entry sheet, not GR quantity.
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Check:
Movement type
Stock availability
Account determination
Authorization
Batch/serial requirement
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Controls when serial numbers are required:
GR
GI
Transfer
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Planned: Known beforehand, included in PO
Unplanned: Entered during invoice
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Material Type controls:
Number range
Valuation
Procurement type
Account category reference
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Allowed if:
Partial delivery enabled
Quantity within tolerance
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Quota arrangement splits procurement among vendors based on percentages.
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Condition-based tax
HSN codes
Input tax credit
GSTR reports
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Blocks stock movement during physical count.
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Consumption-based relies on historical usage;
MRP considers demand, BOM, and stock.
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Material master
Vendor master
Open PO
Stock balances
Using LSMW or S/4 Migration Cockpit.
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GR/IR mismatch → Clear via MR11
Wrong account posting → OBYC
Price error → Material master
PO lock → Remove via SM12
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Simplified data model
MATDOC table
Mandatory Material Ledger
Business Partner replaces vendor master
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Create PR → Convert to PO directly
Skip RFQ
Release via emergency strategy
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Procurement cycle time
Inventory turnover
Vendor delivery performance
Stock aging
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User issue resolution
Process improvement
Data correction
Coordination with FI/PP
Change requests
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Sales order triggers PR → PO → Direct delivery to customer.
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Via tolerance limits and PO settings.
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Components cost excluded;
Only service charges applied via conditions.
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By understanding business needs, explaining SAP limitations, offering solutions, and maintaining communication.
