Procurement Cycle In SAP MM-- Raw Material Domestic Procurement

1.1 Procurement of Raw Material -Local

1.1.1 Definition of the Process

This process explains the procurement of raw material example electronic /electrical /Mechanical raw material/spares parts from Domestic Vendor.

1.1.1.1 Purpose

Create / amend / approve / print Purchasing documents for procuring raw materials, spares, consumables and send them to Vendor

1.1.1 Explanation of Process Flow

· Requirements Determination


Basically, how do we know we need something? The Marketing department provides PPI inputs. The request for materials as mentioned in procurement BOM usually comes in the form of a purchase requisition. Also
Purchase requisition are created by different department
Purchase requisition is subjected to release strategy based on the Approval Matrix Approval are based on the value of the Purchase requisition and also on the nature of purchase and value of Material

· Source Determination

The source of supply is determined for the needed item by the purchasing department Enquiries are sent to the suppliers .Enquiry contains the details of the material specification, terms and conditions, quantity of materials etc. Out of SAP


· Vendor selection

Quotations provided by the different suppliers are evaluated in terms of content i.e. Price, Taxes & Duties. Vendors are compared based on the Landed price which includes basic price & Duties .Comparative statement is prepared based on the Landed price and vendor is finalized.

· Purchase order /Scheduling Agreement are prepared for Vendor.

There are two types of text applicable In Indian Scenerio.

GTC General Terms applicable for entire Purchase order.

Item specific text which is applicable for the particular item.



The different pricing components applicable in case of Local Purchase (Indian Scenerio):

§ Basic Price

§ Freight

§ Basic Excise Duty

§ Cess on Excise duty

§ Higher Education Cess on Excise duty

§ Central Sales Tax

§ Value Added Tax

§ Insurance

§ Development Charges

§ Loading & Unloading Charges

§ Packing & Forwarding Charges

§ Octroi

§ Absolute Discounts (Value)

§ Discount %

There are amortization charges applicable.

· Payment Terms, Inco terms is captured and Purchase order is printed on pre-printed stationary.

· Purchase order is subjected to Approval. Please refer to approval Matrix. Advance is paid to Supplier as per the Payment Terms. Request is sent to Finance Department for Advance Payment to Supplier.

· Purchase Order is communicated to Suppliers via Email, Courier.


Steps In SAP

1. Purchase Requisition is Generated Using T-Code ME51n or Automatically Through MRP.
2. Use T-code ME54N/ME55 Foe Releasing PR.
3. After Approval RFQ is Created Using T-Code ME41 and send RFQ to Suppliers.
4. Maintain RFQ(Filled by Vendors) using ME47 .
5. Price Comparision using T-Code Me49 and Vendor is Finalised.
6. Create/Change Purchase Order Using T-Code ME21N/ME22N.
7. Release Purchase Order Using T-Code ME29N.
8. Purchase Order Printout Using T-Code ME9F and Send To Vendor.