SAP MM Integration with SD-PM-PS-FI-WM-QM modules

Material Management (MM) module is one of the core modules of SAP ERP (formerly known as SAP R/3). MM is highly integrated with other modules such as FICO (Financial Accounting & Controlling), Sales & Distribution (SD), Production Planning (PP), Plant Maintenance (PM), Project System (PS), Warehouse Management (WM), Quality Management (QM), etc.

The main areas covered by MM are:

• Enterprise structure
• Master Data (vendor and material)
• Purchasing /procurement
• Materials planning (MRP and CBP)
• Inventory Management and Physical Inventory Management
• Material valuation and Account determination
• Invoice verification

In this post, I will try to explain the integration between SAP MM and other modules. I will explain it in a simple way. Please give your opinion or suggestion by writing a comment at the end of this post.

The sales order (SO) or demand forecast of a finished product from SD module can be considered as a requirement in SAP MM. I have explained the SD business processes at previous article.

• If the finished product is available, then it can be delivered to the customer by converting SO to outbound delivery, then perform Goods Issue (GI) transaction based on outbound delivery in inventory management.
• If the finished product is not available, this requirement can trigger materials planning process in MM. Materials planning in SAP can automatically create procurement proposals, such as planned order. Planned order can be converted into:
  • Purchase Requisition (PR), if the finished product is procured externally.
  • Production order in PP, if the finished product is produced internally. The production order will be considered as dependent requirement for their components or raw materials. SAP will determine these dependent requirements by using the information from Bill of Materials (BOM) of finished product. These dependent requirements will also trigger materials planning for the components  that will create planned order of the components.
  In addition, materials planning can also create purchase requisition directly as a procurement proposal (no planned order).

The maintenance order (from PM) or network activity (from PS) can also create:

• PR of material/service that is procured externally, or
• Reservation of the stock material.
  • If the stock of material is available then the reservation item can be issued with GI transaction in Inventory Management.
  • If it’s not available, the reservation (which can be considered as requirement) can be processed by materials planning to create procurement proposals, such as planned order that can be converted to PR or production order.

The PR will be processed by purchasing/procurement department with MM module to be a purchase order (PO). Based on the PO, the vendor will deliver the material/service. Then it will be received in Inventory Management with Goods Receipt (GR) transaction.

• If the material received is finished product, we can deliver it to the customer by converting SO to outbound delivery, then perform GI transaction in inventory management.
• If the material is component or raw material, we can use it in production order to produce the finished product with GI to production order transaction. When the finished product has been  produced, we can perform the GR to production order transaction in inventory management. Then, we can deliver it to the customer by converting SO to outbound delivery, then perform GI transaction in inventory management.

The vendor that delivered the material/service based on PO, will send their invoice to the responsible person in the company. Then, he/she will perform the Invoice Receipt (IR) transaction in MM. Based on the IR transaction, the finance department will process the payment in FI module.
The GR, GI, and other transactions in Inventory Management can be linked in details to the WM module. In WM module, we can maintain material stock at a level that more detail (which is storage bin) than MM module (which is storage location). We can store the same materials at several storage bins in a storage location.
With QM, we can copy quality master data, such as certificate required, of a material that ordered in a PO, so the vendor will provide it.  When we post GR transaction, we can post it to quality inspection stock. We can give a score/quality level to the material that delivered by vendor.
The GR and GI transactions in inventory management also trigger the accounting journals in FI module that in a real-time basis update the company financial reports such as Balance Sheet and Profit & Loss Statement.

The budgeting in PS can also be linked to the PR and PO in MM to keep that the total value (price) in PR and PO does not exceed the budget.
If you have something to add about MM integration with other modules please write on comment section.