Why Companies Need SAP MM and What This Module Does?



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Posted 2017-12-26 19:33:45

One major importance of MM is in its ability for accurate stock taking which is very useful to the manufacturing industry where material availability for use in production activities is of utmost importance as this has the potential to either make or mar the production cycle. Hence, MM plays a vital role in Materials Requirement Planning for manufacturing companies with particular importance to those who deal in fast moving consumer goods. Another importance of MM to companies is in its procurement mix which involves the procurement of materials of stock and non-stock and also the procurement of services.

most companies are able to keep accurate records of their stock inventory, have a proper audit of material valuation, and stock tracking in the various regions of business operations. Hence, the module helps to promote a centralized repository of total company inventory stock. Also, procurement can be centralized and used to capture all associated cost elements such as freight cost, custom duties, transport/delivery charges, loading and unloading charges etc. 

 

SAP MM Organizational Structure

Next, let us describe organizational units of Material Management in our SAP MM overview. Most companies have a framework upon which their business operations are conducted. This framework is usually referred to as organization structure or in SAP parlance enterprise structure. The enterprise structure is composed of a number of organizational units which relates to one another. To establish this relationship between the levels it is important that we assign them in such a way that they lie in the same hierarchy.

 

SAP MM Organizational Structure

Next, let us describe organizational units of Material Management in our SAP MM overview. Most companies have a framework upon which their business operations are conducted. This framework is usually referred to as organization structure or in SAP parlance enterprise structure. The enterprise structure is composed of a number of organizational units which relates to one another. To establish this relationship between the levels it is important that we assign them in such a way that they lie in the same hierarchy.

Client

Within the SAP system we consider a client as self-contained in terms of data, and it is the highest hierarchical level in the SAP system. All specifications as it relates to data entered at this level is applied to all company codes and all the other organizational units. In a particular R/3 system, we can have single or multiple company codes depending on the business requirements as it pertains to the company operations. Hence, a client key is usually used as a unique identifier when access to the respective clients are needed.

Company Code

Following the client is the company code where replication of independent accounts can be performed. It is the smallest unit in the organization where this takes place. This represent an independent unit of Balance Sheet, and Profit and Loss Accounting, e.g. as seen in a company within a corporate group. As stated earlier, several company codes can exist in a single client in order to thus keep separate sets of financial books.

Plant

A plant is regarded the logistics unit within the organizational hierarchy handles the procurement of materials, services, production, materials valuation, materials planning, and inventory. In some other business scenarios, a plant can represent a Manufacturing Facility, a Distribution Centre, Sales Regions, Head offices (e.g., in banking sector) or a maintenance office (e.g., in maintenance planning plants) within a company.

Storage Location

Differentiation of material stocks within a plant takes place at the storage location level. Here also, we monitor goods movements in and out of inventory and carry out physical inventory count to ascertain inventory levels at given periods.

Purchasing Organization

The purchasing organization unit is responsible for procurement of materials or services on behalf of the company. It also negotiates conditions of purchase with vendors. A purchasing organisation can procure for several company codes (centralized purchasing), specific company code (company specific), and specific plants (plant specific) depending on the configurations.

Purchasing Group

This organizational unit is responsible for the everyday procurement activities that go on in an organization. Usually, they comprise a group of buyers, depending on the size of the company, and are responsible for procurement of goods and services.

 

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