Materials management (MM) is a core functionality in SAP S/4HANA that drives logistics and supply chain operations. Its purpose is to manage processes such as purchasing, goods receiving, material storage, consumption-based planning, and inventory.

What is Logistics and Supply Chain Management?

Logistics can be considered the management of business operations, including the acquisition, storage, transportation, and delivery of goods along the supply chain. A supply chain is a network of retailers, distributors, transporters, storage facilities, and suppliers that collaborate in the sale, delivery, and production of a particular product.

MM is a major component of logistics and consists of three different flows that are vital to the supply chain. These flows are material, information, and financial. Let’s take a look at each.

A material flow is the movement of materials from the supplier, to your company, and then to the customer. This series can sometimes include the return of materials from customers. These days, it’s not enough to simply interact with suppliers and customers, so companies go beyond that by integrating with them. Process improvements that increase transparency into material flows also allow your company to be flexible and responsive when interacting with your customers. The more responsive a company is to its customers, the more likely it will be perceived as adaptable, quick, and dependable–and in turn, have a greater advantage over competitors.

Next is information flow, which pertains to transmitting orders and updating the status of all deliveries. There is also an opportunity for competitive advantage here, as companies can show customers and vendors viability by using real-time information.

Lastly, financial flow includes the financial documents created for each material movement. If a material is valuated, then either a credit or debit movement is made between accounts to reflect that material’s value. One example could be moving material from inventory accounts to accounts payable clearing accounts.

Logistics in SAP S/4HANA

Logistics in SAP follows the movement of materials from manufacturer to consumer. Companies are constantly looking for ways to evolve their software for easier and faster use. The SAP S/4HANA suite has paved the way for smoother business process performance; the newest on-premise version was released in September 2019 under the name SAP S/4HANA 1909.

In terms of logistics, operations have been simplified in SAP S/4HANA by combining several interconnected logistics and supply chain functionalities. It also makes the user experience with SAP software much friendlier.

The Materials Management with SAP S/4HANA Book

If you’re like many SAP consultants looking to improve your company’s MM processes, you might not know where to start. Our Materials Management with SAP S/4HANA: Business Processes and Configuration book is the perfect place to begin your journey, as you’ll learn how to configure this core functionality in your SAP S/4HANA system.

MM Foundations

Begin with part one, which provides insight on the foundations of materials management. You’ll run through an overview of MM in SAP S/4HANA, and learn about different integrations for the three flows.

You’ll explore the organizational structure of MM, which incorporates company codes, plants, storage locations, purchasing organizations, purchasing groups, and calendars. Then focus on the material master, where you’ll learn about configuration and data.

End the first part of the book with details on business partners. You’ll learn how to configure vendor account groups and business partners, and how to integrate customers and vendors.

Procurement

Next, dive into procurement. You’ll learn about the purchasing information record and how it contains data specific to a particular material and business partner.

Then you’ll understand how to create and process purchase requisitions. You’ll create a new purchase requisition type to fully grasp the configuration process.

Gain some insight on the request for quotation (RFQ) function to learn how they’re created, released, and sent to selected vendors. On the flip side, examine the process in which the quotation is received from the vendor, and how to enter quotations, compare competing quotations, and reject losing bids.

Purchase orders (PO) are then discussed, including the various functions associated with the PO such as account assignment, message output, and order type. You’ll also review the variations, such as outline purchase agreements, scheduling agreements, and contacts.

The last couple chapters of the procurement section review the external service management side of procurement—the service master record, the standard service catalog, and the service entry—along with special procurement types, which enable your company to manage specialized business processes in procurement or inventory management.

Planning and Inventory

When it comes to the planning side of materials management, learn about the functionality of consumption-based planning and evaluations. Then, learn how to set up an MRP area and how to use it with MRP Live. The forecasting functionality in MM is also discussed in the book, providing an overview of the forecast models, parameters, and options that can be used in SAP S/4HANA.

Then review inventory management processes. Examine various goods issues such as issue to production, issue to sampling, and issue to scrap. Next, dive into the function of goods receipts for production orders and POs. You’ll learn about the physical inventory process—so critical for most companies!—along with invoice verification.

Next, you’ll survey the valuation and account assignment processes – which include last in, first out (LIFO) and first in, first out (FIFO) strategies. You’ll also cover the Material Ledger, which is mandatory in SAP S/4HANA.

Finish this section with details on the classification system. You’ll learn about the importance of this feature in regards to the material master, PO release strategies, and many other areas.

Advanced Tools

With the basics down, explore more advanced MM features such as the Document Management System (DMS). Examine data related to batch management, including batch record for material. Then move on to details about the Early Warning System (EWS), SAP’s alert tool. Understand how the EWS can help business users monitor and get alerts on critical business situations.

The final chapter of the book provides a deep dive into some of the SAP-delivered standard reports that are available. You’ll also cover next-generation, SAP Fiori-based reporting and transactional apps in SAP S/4HANA.

Who Is This Book For?

This book is beneficial for those working with materials management processes, as well as related processes like production planning, quality management, and plant maintenance. Logistics, supply chain, and purchasing managers looking to understand the functionality and configuration of MM in SAP S/4HANA will find this book useful.

About the Authors

Jawad Akhtar is an SAP logistics and supply chain management expert with a focus on business sales and delivery. He earned his chemical engineering degree from the Missouri University of Science and Technology in the United States. He has more than 20 years of professional experience, 16 of which have been spent working with SAP systems. He has experience working on several large-scale, end-to-end SAP implementation project lifecycles, including rollouts. He works with SAP clients to help them identify the root causes of business issues and address those issues with the appropriate SAP products and change management strategies. He now focuses on next-generation SAP products such as SAP S/4HANA, SAP Integrated Business Planning (SAP IBP), SAP Ariba, and SAP C/4HANA.

Martin Murray was a respected logistics consultant and worked with IBM for more than 15 years. He joined the computer industry upon his graduation from Middlesex University in 1986. In 1991, he began working with SAP R/2 in the materials management area for a London-based multinational beverage company, and in 1994, he moved to the United States to work as an SAP R/3 consultant.

This content was originally posted on the SAP PRESS Blog.