Role of Material Management (SAP MM) in your Organization

All ERP software supports every business process with its distinct modules helping to gain better visibility of analytics and in turn easing the entire cycle of operations of each module’s distinct process. SAP is one such player in the ERP world with 40+ years of expertise in providing unique business solutions drafted for your business’s needs.   

The core business modules offered by the SAP ERP software are:  

  • Human Resource Management (SAP HRM)  
  • Production Planning (SAP PP)  
  • Material Management (SAP MM)  
  • Financial Supply Chain Management (SAP FSCM)  
  • Sales and Distribution (SAP SD)  
  • Project System (SAP PS)  
  • Financial Accounting and Controlling (SAP FICO)  
  • Plant Maintenance (SAP PM)  
  • Quality Management (SAP QM)  

This article focuses on elaborating on the core functionalities of the SAP MM (Material Management) module. Let’s dive in to understand Material Management.   

What is Material Management? 

To support the Logistics and Supply chain operations of an organization we use the prominent module of ERP software in SAP S/4HANA Materials Management (MM). Its goal is to control processes including inventory, purchasing, receiving items, storing materials, and consumption-based planning. Now if you’re wondering what the Logistic and supply chain Operations of an organization are well let’s have an intro to that as well, 

The management of commercial operations, such as the procurement, storage, transportation, and delivery of items along the supply chain, can be referred to as logistics. A supply chain is a group of businesses that work together to sell, deliver, and produce a certain product, including retailers, distributors, transporters, storage facilities, and suppliers. 

The supply chain depends on three main flows that make up the Material Management (SAP MM) module, a significant part of logistics. These flows include   

  • Material flow 
  • Financial flow 
  • Informational flow 

Let’s examine each one together!  

Material Flow

The transport of materials from the supplier to your business and finally to the client is known as a material flow. This series occasionally includes customer returns of goods. Companies today go above and above by integrating with their suppliers and consumers since merely interacting with them is no longer sufficient. Process enhancements that boost material flow transparency also enable your business to be adaptable and responsive when dealing with clients. A business will likely be seen as flexible, quick, and reliable and will therefore have an advantage over competing businesses if it is more responsive to its clients. 

Financial Flow

The financial paperwork that is produced for each transportation of materials is also included in the financial flow. A credit or debit movement across accounts is performed to reflect a material’s value if it has been valued. Moving materials from inventory accounts to accounts payable clearing accounts is one illustration. 

Informational Flow

Information flow that deals with sending orders and keeping track of all deliveries are important. The use of real-time information by businesses to demonstrate to clients and suppliers their viability is an additional opportunity for competitive advantage. 

Organizational Structure of the SAP MM module

Several structures can be utilized in SAP ERP to represent the company’s legal and organizational structure. It is possible to structure organizational components from the perspectives of accounting, human resources, and materials management. You can mix and match these constructions. All business transactions can be processed within the framework provided by the organizational structures. 

The MM (Materials Management) module is represented by the organizational units listed below: 

  • Company Code 
  • Plant 
  • Storage Location 
  • Client 
Modules integrated with SAP MM

The SAP MM component interfaces with other SAP components including Production Planning (PP), Sales and Distribution (SD), Plant Maintenance (PM), Quality Management (QM), Finance (FI), Controlling (CO), and Asset Management (AM) to play an essential role in a manufacturer’s supply chain.  Let’s explore and understand each of their roles in detail. 

SAP MM with PP module – Since SAP MM deals with material acquisition based on production requirements, it is connected to the PP module. It is integrated with MRPs, receipts, and issuing materials by production orders.  

SAP MM with SD module – The SAP SD module is integrated with the MM module due to its hold of information related to material creation which is used during the creation of a Sales Order or while passing the order quantity for production. It is linked to sectors like delivery, availability checks, stock transfer requirements, and so forth.  

SAP MM with WM module - Because it keeps data on internal material storage and transport, the SAP WM module is tied to the MM module. 

SAP MM with FICO module - The FI module is connected to the MM module because every action taken in the MM module, such as a goods receipt or an invoice receipt, influences the organization’s financial operations. It relates to areas such as material valuation, vendor payment, material costing, etc. 

SAP MM with QM Module – The SAP MM module is integrated with the QM module to send the material information to the quality control team to set the quality criteria. 

SAP MM with PM module - The maintenance order specifies the material or service requirements. This results in the creation of PR. MM changes this PR into a PO. A PO’s products will be delivered to Maintenance by MM. The spare parts that were held back for maintenance orders will be released by MM by the reservation number. 

Prime Functionalities of SAP MM module 

Determining the Requirements: Materials planning and control or user departments can both be used to determine what materials are needed.  Purchase requisitions could be manually entered or automatically generated by the materials planning and control system. 

Source Determination: Based on previous orders and active longer-term purchase agreements, the purchasing component aids in your identification of potential supplier sources. This speeds up drafting requests for quotations (RFQs), which, at the customer’s discretion, may be electronically transmitted to vendors via SAP EDI. 

Vendor Selection Process and Quotation Comparison: The system’s ability to simulate pricing scenarios enables you to compare a variety of quotes. Letters of rejection can be automatically sent. 

Purchase Order (PO) Processing: To assist you in creating a purchase order, the purchasing system incorporates information from the requisition and the bid. Like buying requisitions, you can manually create POs (Purchase Order) or have the system do it for you. Contracts and agreements with vendors (referred to as longer-term purchase agreements in the SAP System) are also supported. 

Purchase Order (PO) Follow-Up: When you specify a reminder period, the system examines it and, if necessary, publishes expediters or reminders at predetermined intervals. Additionally, it gives you the most recent status of all purchase orders, quotes, and requisitions. 

Inventory Management and Goods Receiving: The person in charge of goods reception can easily confirm the receipt of items by entering the PO number. Buyers can limit over- and under-delivery of ordered items by defining acceptable tolerances. 

Verification of Invoice: The technology allows for the comparison and validation of invoices. Since the system has access to PO and goods receipt data, it notifies the accounts payable clerk of quantity and price variations. This quickens the auditing and clearing of invoices for payment procedures. 

Conclusion

SAP MM can simply be a part of a manufacturing company’s management procedures to assist a continuous flow of activities from the very beginning of the production process to the very end when the Client has the products, it is important to fully understand the various aspects of the system and how they operate. When handled by several management heads, manufacturing logistics are frequently quite complicated and a source of issues, but with clear communication in the form of database sharing, the logistics become seamless and controllable. 

So, guys, to know more about the features of the SAP MM module and learn the benefits of ERP do contact our SAP Expertise! 

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