SAP MM (Materials Management) is a core module in the SAP ERP system that deals with

procurement and inventory management. It plays a vital role in a manufacturer’s supply chain
by managing materials (products and/or services) and resources efficiently.

Key Components of SAP MM:

1. Purchasing (Procurement):
o Purchase Requisitions
o Request for Quotations (RFQ)
o Purchase Orders (PO)
o Contract and Source Determination
o Vendor Management
2. Inventory Management:
o Goods Receipt (GR)
o Goods Issue (GI)
o Stock Transfers
o Physical Inventory
o Inventory Valuation
3. Material Master Data:
o Central repository of material-specific data.
o Used across modules like SD (Sales & Distribution), PP (Production
Planning), etc.
4. Vendor Master Data:
o Stores all relevant information about suppliers.
o Integrated with Finance (FI) for payment processing.
5. Invoice Verification:
o Links procurement and accounting.
o Ensures that invoices received from vendors match purchase orders and goods
receipts.
6. Consumption-Based Planning:
o Helps forecast material requirements based on past consumption.
7. Logistics Invoice Verification:
o Ensures accuracy of invoices, matching with goods receipt and PO.

Integration with Other SAP Modules:

 SAP SD (Sales and Distribution): for order processing and delivery.

 SAP FI (Financial Accounting): for tracking payments and expenditures.
 SAP CO (Controlling): for cost control and management.
 SAP PP (Production Planning): for material requirement planning.
 SAP WM (Warehouse Management): for advanced warehouse functions.

Common T-Codes in SAP MM:

T-Code Description
ME21N Create Purchase Order
ME22N Change Purchase Order
ME23N Display Purchase Order
MIGO Goods Movement (GR, GI, Transfer)
MIRO Enter Incoming Invoice
MM01 Create Material Master
MM02 Change Material Master
MM03 Display Material Master

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Purchasing in SAP MM (Materials Management)

Purchasing is a core function of SAP MM that manages procurement processes, from

identifying the need for materials to paying the vendors. It ensures materials are available in
the right quantity, at the right time, and at the right price.

🔹 Main Activities in SAP Purchasing:

1. Purchase Requisition (PR):

o Internal document to request procurement of a material/service.
o Created manually or automatically via MRP (Material Requirements
Planning).
o T-Code: ME51N (Create), ME52N (Change), ME53N (Display)
2. Request for Quotation (RFQ):
o Sent to vendors to request pricing and terms.
o Helps evaluate and select the best supplier.
o T-Code: ME41 (Create), ME42 (Change), ME43 (Display)
3. Quotation and Vendor Comparison:
o Responses to RFQs are recorded and compared.
o Best vendor is chosen based on price, delivery time, etc.
o T-Code: ME47 (Maintain Quotation), ME49 (Compare)
4. Purchase Order (PO):
o Legal contract sent to a vendor for delivery of goods/services.
o Can be based on PR, RFQ, or entered directly.
o T-Code: ME21N (Create), ME22N (Change), ME23N (Display)
5. Outline Agreements:
o Contracts: Long-term agreements with a vendor for materials at pre-defined
conditions.
 o Scheduling Agreements: Delivery schedule over a certain period.
o T-Code: ME31K (Contract), ME31L (Scheduling Agreement)
6. Goods Receipt (GR):
o Confirmation that the materials have been received.
o Inventory updated and accounting entries posted.
o T-Code: MIGO
7. Invoice Verification:
o Incoming vendor invoice is verified against PO and GR.
o Ensures 3-way match: PO → GR → Invoice.
o T-Code: MIRO
8. Payment to Vendor:
o Handled in SAP FI (Financial Accounting) after invoice verification.

🔹 Organizational Structure for Purchasing in SAP:

Level Description
Client Top-level unit in SAP (represents the enterprise).
Company Code Represents a legal entity for financial reporting.
Plant Physical location where materials are stored/used.
Purchasing Organization Unit responsible for procurement activities.
Purchasing Group Individual or group responsible for procurement tasks.

🔹 Integration with Other Modules:

 SAP FI (Finance): For invoice verification and payment.

 SAP WM (Warehouse Mgmt): For managing stock locations after GR.
 SAP SD (Sales & Distribution): For third-party procurement scenarios.
 SAP PP (Production Planning): For material requirements based on production
orders.

🔹 Example Procurement Process Flow:

1. Material requirement identified →

2. Purchase Requisition created →
3. RFQ sent to vendors →
4. Vendor quotations received →
5. PO created →
6. Goods received (GR) →
7. Invoice verified (MIRO) →
8. Vendor payment made.

Here are real-time scenarios for SAP MM (Materials Management) that are commonly
encountered in various industries. These help illustrate how SAP MM is applied in actual
business processes.
🔧 1. Procure-to-Pay (P2P) Process

Scenario: A company needs to purchase raw materials for manufacturing.

Steps:

1. Purchase Requisition created by a production planner.

2. Request for Quotation (RFQ) sent to multiple vendors.
3. Vendor Quotation comparison done in SAP.
4. Purchase Order (PO) created for selected vendor.
5. Goods Receipt (GR) posted when materials arrive.
6. Invoice Verification against PO and GR.
7. Payment processed via SAP FI.

✅ Used in manufacturing, retail, automotive industries.

🧾 2. Automatic PO Generation

Scenario: A retail chain wants POs to be auto-generated when stock falls below reorder
level.

Steps:

 Material Master and Vendor Master configured.

 Source List and Info Record maintained.
 MRP (Material Requirement Planning) run.
 SAP auto-generates Purchase Requisition and converts it to PO.

✅ Used in supermarkets, pharmacies, warehouses.

🚚 3. Third-Party Procurement

Scenario: A trading company sells goods that are shipped directly from vendor to customer.

Steps:

1. Sales Order created in SD.

2. SAP triggers PO to third-party vendor.
3. Vendor ships directly to customer.
4. Vendor sends invoice to company.
5. Company bills customer via SAP SD.

✅ Common in dropshipping, electronics resellers.

📦 4. Subcontracting Process

Scenario: A company sends raw materials to a vendor for processing (e.g., metal parts for
painting).

Steps:

1. Subcontracting PO created.
2. Components (raw materials) provided to vendor using a transfer posting.
3. Vendor returns finished goods.
4. Goods Receipt posted in SAP.
5. Invoice verification and payment.

✅ Used in automotive, textile, chemical industries.

🏢 5. Stock Transfer Between Plants

Scenario: A company with multiple plants transfers materials from one location to another.

Steps:

 Stock Transport Order (STO) created.

 Shipping and delivery processed in supplying plant.
 Goods Receipt posted in receiving plant.

✅ Used in large manufacturing companies with distributed facilities.

🔍 6. Handling Non-Stock Items

Scenario: Buying office supplies like laptops or furniture that are not tracked in inventory.

Steps:

 PO created with account assignment (e.g., cost center).

 No material master required.
 Goods Receipt optional.
 Invoice posted directly with reference to PO.

✅ Used for services, assets, and indirect procurement.

📉 7. MRP and Inventory Shortage

Scenario: MRP run indicates critical shortages of raw materials.

Steps:

 MRP triggers purchase requisitions.

 Planner evaluates demand vs. stock.
 Converts PRs to POs.
 Expedites delivery.

✅ Crucial in Just-in-Time (JIT) production environments.

🧮 8. Consignment Stock Handling

Scenario: Vendor-owned stock held at your site; billed only when used.

Steps:

 Consignment info record maintained.

 Goods Receipt posted as consignment stock (no liability yet).
 Withdrawn material triggers settlement with vendor.

✅ Useful in pharma, automotive, electronics sectors.