Download ERPtips Journal SAP MM Best Practices PDF

TitleERPtips Journal SAP MM Best Practices
TagsBusiness Process Inventory Warehouse Enterprise Resource Planning Accountability
File Size70.3 KB
Total Pages7
Table of Contents
                            Introduction:
General SAP Project Best Practices:
Enterprise Structure
Conclusion:
About the Author:
                        
Document Text Contents
Page 1

Copyright © 2007 by Klee Associates, Inc. Page 1

www.SAPtips.com

Materials Management –
Master the Best Practices Part 1:

General SAP Project and Materials Management
Organizational Structure Best Practices

Jocelyn Hayes, SAPtips Director of Training and Consulting

Editor's Note: Take a tip (or several) from someone who has been involved in many SAP®
implementations, in many companies. Jocelyn Hayes leverages her 11 years of
experience in Logistics and Materials Management and has compiled a list of her “best”
tips, tricks, and overall practices for Materials Management organizational structure and
other SAP projects. Remember, if you like what you read, then plan to join Jocelyn in
Dallas this Spring when she presents an entire class on Materials Management.


Introduction:
As a Logistics (primarily Materials Management) SAP Consultant for over 11 years, I have seen
the good, the bad, and the ugly when it comes to SAP implementations and practices. There are
the well-known best practices, but there are also some not-so-well-known ones that can make or
break portions of an implementation. In this white paper, I will talk generally about project best
practices and I will also provide some best practices as well as definitions about Enterprise
Structures. While this white paper series will not discuss every aspect of Materials Management
best practices, I will try to share with you my experiences and some key considerations for any
SAP implementation.

In future installments of this series, we will explore MM Best Practices in areas of Material
Masters, Vendor Masters, Purchasing, Inventory Management, Consumption Based Planning,
Invoice Verification, and Reporting.


General SAP Project Best Practices:

Scope Creep
This is a general project principle, but very key in an SAP implementation. The project
preparation phase of an SAP project is absolutely the most important phase of any SAP project.
Unfortunately, most of the key implementers are not involved in the project until the Blueprint
phase. This is a major flaw in almost every SAP implementation in which I have been involved.

TIP #1: Involve all key decision makers and team members in the entire lifecycle of the project,
starting with the Project Preparation phase, in which you define project scope.

80/20 rule
Do not try to tackle every single “what if” scenario when designing your solution. You can spend
hundreds of hours of your time on “what if” scenarios and never tackle the basics. If you take this
approach to solve every scenario, I guarantee you will double, if not triple, your implementation
time. Start with the standard products, the standard business process, and I can basically
guarantee that SAP will have a standard solution in their ERP package to fit your business
process need. So, the 80/20 rule is that you will spend 80% of your time on 20% of your
business processes if you are not careful.

TIP #2: Table the 20% of your business processes for which SAP does not provide a “standard”
solution. Leave them for post go-live. Seriously. It may sound crazy, but you will figure out a
solution for them and your business will survive. It is more important to go-live not fully ready,
than to not go-live at all.

Page 2

Copyright © 2007 by Klee Associates, Inc. Page 2

www.SAPtips.com

Materials Management –
Master the Best Practices Part 1:

General SAP Project and Materials Management
Organizational Structure Best Practices

Team Members
Selecting team members represents the most important decision your Project Manager or
Business Stakeholders will make (well, next to selecting SAP as their ERP solution). The team
members will make or break your project. When you’re choosing functional team members, you’ll
need to look for individuals who:


1. Know your business well and know the requirements of their business process area to
get the product out the door and to keep your customers happy.

2. Are open to new solutions and new business process flows. You do not want someone
reinventing the old system within SAP. While it is possible to custom code your own
solution in SAP, it is not why you bought a world-class enterprise system. You bought it
because it has standard functionality that will meet or exceed your business
requirements.

3. Have influence over people in their respective departments and are highly respected. If
the team members are outsiders within their own departments, the members of their
departments will not readily accept the new solution.


TIP #3: Make team member selection the highest priority after you have signed your SAP
purchase contract. You are investing a lot of money into the software and you need to make the
same investment in the team that will implement it. It may cause some heartache in the
departments they are vacating, but it will pay off on go-live day.

Automation
Automation is often the most overlooked function in either a new SAP implementation or an
existing one. I have seen millions of bottom-line dollars left on the table because a company did
not take the time to uncover and determine which transactions could be automated in SAP.

TIP #4: Create a Business Process Flow diagram and include all the steps – both manual and in
the system. Determine which steps could be automated and start an action plan to implement
more automation in the system.


Enterprise Structure
Now that I have discussed some of the general project principles, which are not as trivial as they
seem, I would like to dive into Materials Management-specific best practices and guidelines. The
enterprise structure is often the first area we define when implementing our SAP solution. As a
word of caution, realize that as you move into configuring your solution, you may need to tweak
the Enterprise Structure you defined early in your project. I will describe all the Enterprise
Structure settings, since they are all used in some way in Materials Management (even though
they do not fall specifically under the MM module).

Client
In SAP, a client represents a self-contained SAP system. The client has its own master records,
configuration, and tables. Most small to mid-size companies have one Production client where
they run their “live” environment. Larger companies may choose to have multiple clients by
division or corporate group.

Company Code
A company code contains a complete set of General Ledger accounts. Create a company code
for each entity for which you need to draw up unique Balance Sheets and Profit and Loss
statements.

Page 3

Copyright © 2007 by Klee Associates, Inc. Page 3

www.SAPtips.com

Materials Management –
Master the Best Practices Part 1:

General SAP Project and Materials Management
Organizational Structure Best Practices


Plant
Many considerations exist when determining what to call a “Plant”in a company. I typically
describe a plant as a physical location – it does not have to produce or store anything. The
address can be maintained in the Storage Location or the Plant. However, you can have more
than one plant represent the same physical site if you need to divide it up for other reasons, like
having different MRP and forecast data. Materials are also valuated either at the company code
or plant level – so if you need to segregate material valuation, you can create multiple plants for
that purpose.

The Delivery Address that appears in the Purchasing documents comes from the plant. So, if you
have goods delivered to another address, you should consider setting up another plant.

The following is a list of decision points when creating one or many plants:


1. Do your materials need to have different MRP and forecast data?

2. Do you need to have different valuation methods for your materials?

3. Do you have more than one physical location from/to which you ship items?

Let’s define how a plant is related to other organizational elements:


• The Plant is assigned to a SINGLE company code. A company code can have several
Plants.

• Several storage locations can belong to a single pPlant.

• A single business area is assigned to a plant and to a division.

• A plant can be assigned to several combinations of sales organizations and distribution
channels.

• A plant can have several shipping points. A shipping point can be assigned to several
plants.


Storage Location
Within a plant, you can have multiple storage locations. A storage location is where stock is
physically kept in a plant. A storage location has an address; however, this address is only used
for internal purposes. The address that appears on purchasing documents comes from the Plant.

Stocks are managed on a quantity basis at the storage location and on a value basis at the plant
or company code level (also called the valuation level). You carry out physical inventory at the
storage location level.

If you use Warehouse Management, you can assign one or more storage locations to a
warehouse. Keep in mind that the quantity of the inventory is at the storage location level, the
value is at the plant level, and the physical location of the inventory is at the Warehouse/Storage
Type/Storage bin level.

Finally, you must create at least one storage location for a plant, whether you are storing
inventory there or not.

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Copyright © 2007 by Klee Associates, Inc. Page 4

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Materials Management –
Master the Best Practices Part 1:

General SAP Project and Materials Management
Organizational Structure Best Practices

So some key considerations in determining how to set up your storage locations are:


1. How do you want to perform physical inventory?

2. How do you want to assign your storage locations to warehouses?

Let’s define how a storage location is related to other organizational elements:

More than one storage location can exist in a plant.


• A storage location has at least one address.

• Stock is managed at the storage location level.

• Physical Inventory is carried out at the storage location level.

• A storage location can be assigned to one or many warehouses.

• At least one storage location must be created for a plant.


Warehouse Number
Not all companies will use Warehouse Management, but if you store and pick stock, it is highly
recommended to take advantage of this functionality. Warehouse Management allows you to
define a specific physical location within your warehouse where you can store a specific material.
The combination of warehouse number, storage type, and storage bin represents the physical
location of the stock item.

Some key considerations for determining how to set up your warehouse numbers are:


1. Do you have more than one physical location?

2. Do you have different storage strategies (i.e., stock removal/placement) for individual
materials?


The following illustrates how a warehouse is related to other organizational elements:

• A warehouse does not have an address, but a short descriptive text.

• Stock is managed as a quantity – not a value - within a warehouse.

• Within a plant, you cannot assign several storage locations to the same warehouse
number.


Storage Type
A storage type can represent a physical or logical storage area that consists of one or more
storage bins. Typical examples of storage types include:


• Goods Receipt Area

• Goods Returns Area

• Picking Area

• High Rack Storage Area

Storage type data stored on the Material master include storage bin stock – min/max quantities
and replenishment quantities.

Page 5

Copyright © 2007 by Klee Associates, Inc. Page 5

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Materials Management –
Master the Best Practices Part 1:

General SAP Project and Materials Management
Organizational Structure Best Practices

The following list defines some features of the storage type:


• A storage type does not have an address––just a short description.

• Inventory is executed at the storage type/storage bin level.

• Interim storage bins can be used for goods in movement.

Shipping Point
A shipping point is required to determine the type of shipping and location from where shipping is
to occur.

Let’s illustrate how a shipping point interacts with other organizational elements:


• Shipping point can be assigned to several plants.

• A delivery is initiated from one shipping point, so all items of a delivery can belong to only
one shipping point

• A shipping point has an address.

• The combination of plant, loading group, and shipping condition determine the shipping
point.

• Shipping point is the key selection criteria when processing deliveries from the Delivery
Due List and the Outbound Delivery Monitor.


Purchasing Organization
A purchasing organization represents an organizational unit that procures materials and services
and negotiates with vendors. Companies can have corporate purchasing organizations, company
specific, plant specific, or a combination of these groups. You can also assign a reference (or
master) purchasing organization for a subordinate organization to take advantage of “master”
pricing agreements.

Here’s how a purchasing organization interacts with other organizational elements:


• A purchasing organization can be assigned to “one to many” plants.
• A purchasing organization can be assigned to “zero to many” company codes.

o Since a plant is assigned to a company code, the purchasing organization can be
determined based on the plant selected.

• A purchasing organization can be linked to one or more purchasing organizations,
making it a Reference Purchasing Organization.

• Multiple Purchasing Groups can exist in a purchasing organization to represent various
buying units or entities (or buyers).

• Vendor Master data, InfoRecords, and Pricing Conditions can be maintained at the
purchasing organization level.

• Authorizations to specific purchasing organizations can be maintained in SAP Security.

Sales Organization
Similar to a purchasing organization that is responsible for buying goods and services, a sales
organization is responsible for selling goods and services. A Sales Area is made up of the
combination of Sales Organization, Distribution Channel, and Division.

Page 6

Copyright © 2007 by Klee Associates, Inc. Page 6

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Materials Management –
Master the Best Practices Part 1:

General SAP Project and Materials Management
Organizational Structure Best Practices

Here is how a sales organization interacts with other organizational elements:


• A sales organization is assigned to only one company code because the accounting data
resides at this level. However, if a sales organization and plant are assigned to different
company codes, an internal billing document is automatically generated for accounting
purposes.

• A Sales Organization can be assigned to multiple plants, but multiple plants cannot be
assigned to a sales organization (in other words, one sales organization is assigned to a
plant).

• Customer and Material Master data, and Pricing can be maintained at the Sales
Organization level.

• Sales Document types can be assigned to a Sales Organization.

Distribution Channel
Distribution Channel examples include wholesale, resale, and direct sales.

Let’s discuss how a distribution channel interacts with other organizational elements:


• Distribution channels can be assigned to “one to many” sales organizations and “one to
many” plants.

• Customer and Material Master data and Pricing can be maintained at the distribution
channel level in addition to the sales organization level.

• Items on a delivery note can belong to a different distribution channel, but items on a
billing document cannot, for accounting purposes.


Division
A division represents an organizational value assigning responsibility for sales of goods and
services.

The following illustrates how a division interacts with other organizational elements:


• A division can be allocated to “one to many” sales organizations and distribution
channels.

• To carry out business area account assignments, allocate a business area to a division
from a plant.

• A material can only be assigned to one division – it is stored on the Basic Data screen of
the Material master

• Customers and pricing can have division level specific data,

• It is possible to restrict combining materials from different divisions on a sales document
within the configuration for sales document types,


Business Area
Financial statements can be created for business areas. A business area groups product and
market combinations for accounting purposes.

You’ll assign a business area to each of the combinations of plant and division for automatic
business area account assignment; SAP uses this combination to determine revenue postings.

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