Akila Wedasinghe
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SAP S/4HANA MM Configuration Guide
Comprehensive configuration guide for implementing Materials Management in S/4HANA
SAP S/4HANA MM Configuration Overview
This guide provides a comprehensive overview of the configuration settings required to implement Materials Management in SAP S/4HANA. Materials Management (MM) is a core module that handles the procurement and inventory processes within SAP.
S/4HANA-Specific Considerations
SAP S/4HANA introduces significant changes to the MM module compared to traditional SAP ECC systems:
- Simplified Data Model: Tables MSEG and MKPF are replaced by the MATDOC table
- Mandatory Material Ledger: Material Ledger is activated by default and mandatory
- Simplified MM-FI Integration: Account determination has been simplified
- Fiori-based User Experience: Transaction codes are complemented by Fiori apps
- Embedded Analytics: Real-time reporting capabilities without separate BW extraction
Configuration Methodology
The configuration of MM in S/4HANA follows a structured approach:
Define Enterprise Structure
Configure the organizational elements that represent your company's structure:
- Client
- Company Code
- Plant
- Storage Location
- Purchasing Organization
- Purchasing Group
Configure Master Data Settings
Set up the parameters that control how master data is created and managed:
- Material Types
- Material Groups
- Vendor Account Groups
- Field Selection for Materials and Vendors
- Number Ranges
Configure Procurement Settings
Define the parameters that control the procurement process:
- Document Types
- Item Categories
- Account Assignment Categories
- Release Strategies
- Tolerance Limits
Configure Inventory Management
Set up inventory management parameters:
- Movement Types
- Special Stocks
- Physical Inventory
- Reservation Settings
Configure Valuation and Account Determination
Define how materials are valued and which GL accounts are used:
- Valuation Classes
- Valuation Areas
- Price Control
- Account Determination
- Material Ledger Settings
Configure Special Procurement Types
Set up special procurement processes:
- Consignment
- Subcontracting
- Pipeline
- Stock Transport Orders
- Third-Party Processing
Configure Integration Settings
Set up integration with other modules:
- MM-FI Integration
- MM-SD Integration
- MM-PP Integration
- MM-QM Integration
- MM-WM Integration
Configuration Tools
Transaction Codes for Configuration
- SPRO - SAP Reference IMG
- SIMG - Display IMG
- SCC4 - Client Administration
- SM30 - Table Maintenance
- SE16 - Data Browser
- SE11 - ABAP Dictionary Maintenance
- O1BR - Business Rules Framework
- CFMENUOMT - Fiori Apps for MM Configuration
S/4HANA Simplification Impact on MM Configuration
The following table summarizes major simplifications in S/4HANA that impact MM configuration:
| Area | ECC Approach | S/4HANA Approach | Configuration Impact |
|---|---|---|---|
| Material Documents | MKPF/MSEG tables | MATDOC single table | Simplified data model, enhanced reporting |
| Valuation | Material Ledger optional | Material Ledger mandatory | Material Ledger configuration required |
| Account Determination | Complex configuration | Simplified account determination | Reduced configuration effort |
| User Interface | SAP GUI transactions | Fiori Apps + SAP GUI | Additional configuration for Fiori apps |
| Analytics | Separate BW extraction | Embedded analytics | CDS view configuration |
| Inventory Management | LIS and separate tables | Simplified real-time reporting | LIS configuration not needed |
| Procurement | No ML integration | ML-powered invoice matching | Additional ML configuration options |
Enterprise Structure Configuration
The enterprise structure in SAP S/4HANA defines the organizational framework within which the MM module operates. This configuration is foundational and must be completed before other MM configurations.
Client Configuration
The client is the highest organizational level in SAP and represents a legally and organizationally self-contained unit within the system.
Configuration Steps:
Check Client Settings
Transaction: SCC4
Key settings to check:
- Client Role (Production, Test, Development)
- Cross-Client Object Change Option
- Client-Specific Change Option
Company Code Configuration
A company code represents an independent accounting unit that prepares its own financial statements.
Configuration Steps:
Define Company Code
Transaction: OX02
Required settings:
- Company Code (4-character alphanumeric)
- Name
- City
- Country
- Currency
- Language
Assign Company Code to Company
Transaction: OX15
Link the company code to a company (legal entity) in the SAP system.
Plant Configuration
A plant is an organizational unit where materials are produced or goods and services are provided.
Define Plant
Transaction: OX10
Required settings:
- Plant ID (4-character alphanumeric)
- Name
- Address data
- Factory calendar assignment
Assign Plant to Company Code
Transaction: OX18
Link each plant to a company code for financial postings.
Maintain Plant Parameters
Transaction: OX09
Configure plant-specific parameters:
- Plant Category (Production, Distribution, etc.)
- MRP Controller
- Default Storage Location
Storage Location Configuration
A storage location is an organizational unit that differentiates material stocks within a plant.
Define Storage Location
Transaction: OX09
Required settings:
- Storage Location ID (4-character alphanumeric)
- Description
- Plant assignment
Purchasing Organization Configuration
A purchasing organization is an organizational unit that procures materials and services, negotiates conditions with vendors, and is responsible for such transactions.
Define Purchasing Organization
Transaction: OX01
Required settings:
- Purchasing Organization ID (4-character alphanumeric)
- Description
Assign Purchasing Organization to Company Code
Transaction: OX16
Link each purchasing organization to a company code.
| Assignment Type | Description | Configuration Impact |
|---|---|---|
| Cross-company Code | Purchasing organization can process for multiple company codes | Configure intercompany processes and account determination |
| Company Code-specific | Purchasing organization operates within a single company code | Simpler configuration with standard account determination |
Assign Plant to Purchasing Organization
Transaction: OX17
Define which plants can be supplied by which purchasing organizations.
Purchasing Group Configuration
A purchasing group is a buyer or group of buyers who are responsible for certain purchasing activities.
Define Purchasing Group
Transaction: OME4
Required settings:
- Purchasing Group ID (3-character alphanumeric)
- Description
- Telephone, Fax (optional)
Enterprise Structure Verification
After completing the enterprise structure configuration, it's important to verify the setup to ensure all components are properly linked.
Check Enterprise Structure
Transaction: MM03
Verify the structure using a test material:
- Create a test material (transaction MM01)
- Extend it to all configured plants
- Verify that all organizational levels are properly linked
S/4HANA-Specific Considerations
In S/4HANA, there are additional enterprise structure elements to consider:
- Valuation Area: In S/4HANA, with mandatory Material Ledger, proper configuration of valuation areas is critical
- Extended Warehouse Management (EWM): EWM is embedded in S/4HANA, requiring configuration of warehouse numbers and integration with MM
- Business Partners: Vendors are managed as business partners with role "FLVN01" in S/4HANA
Master Data Configuration
Master data configuration defines how material masters, vendor masters, and other master data objects are structured and processed in the system.
Material Master Configuration
Material master configuration determines the structure, required fields, and control parameters for materials in the system.
Define Material Types
Transaction: OMS2
Configure material types to categorize materials:
| Standard Material Type | Description | Key Settings |
|---|---|---|
| ROH | Raw Material | GR processing time, procurement type |
| HALB | Semi-finished Product | MRP type, production storage location |
| FERT | Finished Product | Availability check, sales data |
| HAWA | Trading Goods | Sales data, purchasing data |
| DIEN | Service | No inventory management |
| VERP | Packaging Material | Returnable packaging management |
Define Material Groups
Transaction: OMSF
Create material groups to classify materials for reporting and procurement.
Configure Field Selection
Transaction: OMSR
Define which fields are:
- Required (mandatory input)
- Optional (input allowed)
- Display only (cannot be changed)
- Suppressed (not displayed)
Configure field selection for each combination of:
- Material Type
- Industry Sector
- View (Basic Data, Purchasing, Accounting, etc.)
S/4HANA-Specific Material Master Settings
In S/4HANA, note these important material master changes:
- Material Ledger fields are now mandatory
- MATDOC replaces MSEG, impacting reporting configuration
- Extended material number field length (40 characters)
- MRP Views have additional parameters for MRP Live
Define Number Ranges for Materials
Transaction: MMNR
Configure internal and external number assignment for materials:
- Define number ranges per material type
- Set up intervals (e.g., 01000000 to 01999999)
- Assign number ranges to material types
Business Partner/Vendor Configuration
In S/4HANA, vendors are managed as business partners with the vendor role.
S/4HANA Business Partner Approach
In S/4HANA, vendors are maintained as business partners with the supplier role (FLVN01). This replaces the traditional vendor master approach in ECC.
Define Business Partner Grouping
Transaction: OBP1
Configure business partner groups for vendors:
- Domestic Vendors
- Foreign Vendors
- One-time Vendors
- Intercompany Vendors
Configure Field Selection for Business Partners
Transaction: OBP3
Define field status (required, optional, display, suppress) for vendor-specific fields based on:
- Business Partner Grouping
- Business Partner Role (FLVN01 for vendors)
- Field Groups (Address, Payment, Purchasing, etc.)
Define Number Ranges for Business Partners
Transaction: BNPR
Configure number ranges for business partners with vendor role.
Source of Supply Configuration
Configure how procurement sources are managed and determined in the system.
Configure Source List
Transaction: MEK1
Configure source list settings:
- Validity periods
- Fixed source indicator
- Source list requirement (optional, mandatory)
Configure Quota Arrangement
Transaction: MEQ1
Configure settings for split ordering among multiple vendors:
- Validity periods
- Quota usage calculation
- Rounding rules
Configure Vendor Subrange
Transaction: MEK1
Define vendor subrange parameters:
- Material/plant-specific vendor assignments
- Preferred vendor flags
- Minimum order quantities
Info Record Configuration
Info records store the purchasing conditions negotiated with vendors for specific materials.
Configure Info Record Parameters
Transaction: OME0
Define parameters for info records:
- Validity period control
- Price change approval workflow
- Purchasing organization determination
Define Partner Functions
Transaction: ME14
Configure partner functions for info records.
Important Note on Master Data Configuration
Master data configuration changes can have far-reaching impacts on existing data. Always test thoroughly in a non-production environment before implementing changes in production. Consider creating a comprehensive conversion strategy for existing master data when migrating to S/4HANA.
Procurement Configuration
Procurement configuration defines the parameters that control the purchasing process from requisition to payment.
Document Type Configuration
Document types control the number ranges, field selection, and behavior of procurement documents.
Define Purchase Order Document Types
Transaction: OME3
Configure standard document types:
| Document Type | Description | Key Settings |
|---|---|---|
| NB | Standard Purchase Order | Default item category, field selection, number range |
| FO | Framework Order (Contract) | Validity period control, release documentation |
| LB | Scheduling Agreement | Delivery schedule control, JIT parameters |
| UB | Stock Transport Order | Default item category U, plant-to-plant parameters |
| KB | Consignment | Special stock indicator K, consignment settlement |
| WK | Third-party Order | Ship-to party determination, delivery monitoring |
| RE | Returns | Credit memo control, return reason codes |
Define Number Ranges for Purchase Documents
Transaction: OME4
Assign number ranges to document types:
- Create number range intervals
- Assign to document types
- Configure fiscal year dependency if needed
Item Category Configuration
Item categories control the behavior of individual line items in procurement documents.
Define Item Categories
Transaction: OME5
Configure standard item categories:
| Item Category | Description | Key Settings |
|---|---|---|
| Standard | Standard Item (Stock Material) | GR indicator, IR indicator, account assignment |
| K | Consignment Item | Special stock indicator, settlement rules |
| L | Subcontracting Item | BOM explosion, component issue control |
| U | Stock Transport Item | Receiving plant, stock transport parameters |
| D | Service Item | Service entry sheet, acceptance parameters |
| Q | Third-party Item | Ship-to party, delivery control |
| W | Material with Source List | Source list verification |
S/4HANA Item Category Enhancements
S/4HANA introduces additional item category capabilities:
- Enhanced service procurement with ML-based service verification
- Integrated quality inspection with item categories
- Automated 3-way matching with configurable tolerance parameters
Account Assignment Configuration
Account assignment configuration determines how costs from procurement are allocated to accounting objects.
Define Account Assignment Categories
Transaction: OME6
Configure standard account assignment categories:
| Category | Description | Key Settings |
|---|---|---|
| K | Cost Center | GL account determination, cost center validation |
| A | Asset | Asset validation, depreciation parameters |
| P | Project | WBS validation, project budget control |
| F | Order | Internal order validation, settlement rules |
| U | Unassigned | Default GL account determination |
| N | Network | Network activity validation |
Configure Account Determination
Transaction: OBYC
Define which GL accounts are used for different procurement postings:
- Stock material postings
- Consumption-based postings
- Service-based postings
- Goods receipt / Invoice receipt clearing
Release Strategy Configuration
Release strategies define the approval workflow for procurement documents.
Define Release Groups and Codes
Transaction: MEF7
Configure release groups and codes:
- Create release groups (e.g., by document type, purchasing organization)
- Define release codes (e.g., department manager, financial approval)
Configure Release Strategy
Transaction: MEF5
Define release strategies with:
- Classification (e.g., by value, material group)
- Release indicators
- Release sequence (parallel or sequential)
- Value thresholds
Assign Release Authorizations
Transaction: MEF6
Assign users to release codes and define their authority:
- Value limits
- Plant restrictions
- Material group restrictions
S/4HANA Release Strategy Enhancements
S/4HANA adds new capabilities for release procedures:
- Fiori-based approval apps
- Mobile approval capabilities
- Enhanced workflow integration
- Collaborative approval with Teams/Slack integration
Invoice Verification Configuration
Invoice verification configuration defines how vendor invoices are processed and validated.
Configure Tolerance Limits
Transaction: OMR6
Define tolerance limits for invoice verification:
- Price variances (percentage and absolute)
- Quantity variances
- Invoice total tolerance
Configure Blocked Invoice Handling
Transaction: OMR7
Define parameters for blocked invoices:
- Block reasons
- Release procedures
- Default accounts for blocked invoices
Configure GR/IR Clearing Account
Transaction: OBYC
Define GR/IR clearing account settings:
- GL account assignment
- Clearing control
- Open item management parameters
S/4HANA Invoice Verification Enhancements
S/4HANA introduces:
- Machine learning for invoice matching and exception handling
- Automated invoice capture with OCR integration
- Real-time analytics for invoice processing performance
- Predictive payment date optimization
Inventory Management Configuration
Inventory management configuration defines how material movements, stock types, and physical inventory processes are handled.
Movement Type Configuration
Movement types control how material movements affect stock balances and are posted to accounting.
Configure Movement Types
Transaction: OMJJ
Define parameters for standard movement types:
| Movement Type | Description | Key Settings |
|---|---|---|
| 101 | GR for PO | Stock impact, value update, quantity update |
| 102 | GR for PO to Quality Inspection | Quality inspection stock, inspection lot creation |
| 122 | Return Delivery to Vendor | Stock reduction, value adjustment |
| 201 | Goods Issue for Cost Center | Consumption posting, cost center charging |
| 261 | Consumption for Production Order | Order consumption, backflush parameters |
| 301 | Plant to Plant Transfer | Sending/receiving plant valuation, transit account |
| 311 | Storage Location Transfer | Sloc-to-sloc movement control |
| 501/502 | Goods Receipt Without Reference | Account determination, reason code requirement |
| 601/602 | Goods Issue Without Reference | Account determination, reason code requirement |
S/4HANA Movement Type Changes
In S/4HANA, movement types are stored in MATDOC instead of MSEG/MKPF. This requires consideration of:
- Material document line item categories
- Enhanced movement type parameters
- Real-time valuation updates
Special Stock Configuration
Special stocks are materials that are physically in your plant but have different ownership or purpose.
Configure Special Stock Indicators
Configure settings for special stock types:
| Indicator | Description | Key Settings |
|---|---|---|
| E | Sales Order Stock | Order reference mandatory, availability check |
| K | Consignment Stock | Vendor allocation, settlement control |
| O | Third-party Processing | Customer allocation, billing control |
| Q | Project Stock | WBS element assignment, availability control |
| W | Pipeline Material | Pipeline fill level control, settlement parameters |
Configure Valuation for Special Stocks
Transaction: OMWM
Define valuation parameters for special stocks:
- Balance sheet account assignment
- Valuation approach (valued/non-valued)
- Settlement procedures
Physical Inventory Configuration
Physical inventory configuration defines how stock counts and inventory adjustments are processed.
Configure Physical Inventory Document Types
Transaction: OMJ1
Define physical inventory document types:
- Annual inventory
- Cycle counting
- Random sample inventory
Configure Count Parameters
Transaction: OMJH
Define settings for physical inventory:
- Tolerance limits for differences
- Zero count handling
- Reconciliation procedures
Configure Difference Account Determination
Transaction: OBYC
Define GL accounts for inventory differences:
- Inventory gain accounts
- Inventory loss accounts
- Reason code-specific accounts
S/4HANA Physical Inventory Enhancements
S/4HANA introduces:
- Mobile inventory counting with Fiori apps
- Barcode/RFID integration
- Real-time inventory visibility
- ML-based cycle counting optimization
Reservation Configuration
Reservations allow you to earmark materials for specific purposes before actual consumption.
Configure Reservation Parameters
Transaction: OMJ8
Define settings for reservations:
- Number ranges
- Validity periods
- Default movement types for goods issue
Configure Availability Check for Reservations
Transaction: OVZ1
Define how reservations affect availability:
- Availability check groups
- Checking rules
- Requirements classes
Material Valuation Configuration
Material valuation configuration defines how materials are valued and how the associated accounting postings are handled.
S/4HANA Material Valuation Changes
In S/4HANA, material valuation undergoes significant changes:
- Material Ledger is mandatory for all materials
- Actual costing is available for all materials
- Simplified data structures for valuation
- Enhanced multilevel actual costing capabilities
Valuation Area Configuration
Valuation areas define the boundaries within which materials are valued uniformly.
Define Valuation Area Type
Transaction: OMWN
Choose the valuation area type:
- Plant-level valuation (standard)
- Company code-level valuation
In S/4HANA, plant-level valuation is recommended for most implementations.
Configure Valuation Areas
Transaction: OMWD
Set parameters for each valuation area:
- Chart of accounts assignment
- Valuation modification allowed flag
- Default price control (S or V)
Material Price Control Configuration
Price control determines how material values are calculated and updated.
Configure Price Control
Transaction: OMSL
Define price control settings:
| Price Control | Description | Key Settings |
|---|---|---|
| S | Standard Price | Price change control, revaluation parameters |
| V | Moving Average Price | Update rules, rounding parameters |
Configure Automatic Price Determination
Transaction: OMWP
Define rules for automatic price updates:
- Moving average calculation parameters
- Inventory sampling methods
- Rounding rules
S/4HANA Price Control Enhancement
With mandatory Material Ledger in S/4HANA, price control is enhanced:
- Multiple currency valuation
- Real-time actual cost calculation
- Enhanced price simulation scenarios
Material Ledger Configuration
Material Ledger is mandatory in S/4HANA and provides enhanced material valuation capabilities.
Activate Material Ledger
Transaction: OMX1
Activate Material Ledger:
- For all valuation areas
- Define currencies (legal valuation, group valuation)
- Set valuation approaches
Configure Actual Costing
Transaction: CKMLCP
Define parameters for actual costing:
- Costing run frequency (monthly, quarterly)
- Single-level vs. multilevel costing
- Price difference allocation methods
Configure Material Ledger Account Determination
Transaction: OBYC
Define GL accounts for Material Ledger:
- Price difference accounts
- Exchange rate difference accounts
- Revaluation accounts
Account Determination Configuration
Account determination defines which GL accounts are used for inventory-related postings.
Define Valuation Classes
Transaction: OMSK
Create valuation classes to group materials with similar accounting requirements:
- Raw Materials (e.g., 3000-3999)
- Semi-finished Products (e.g., 4000-4999)
- Finished Products (e.g., 5000-5999)
- Trading Goods (e.g., 6000-6999)
Configure Valuation Grouping Codes
Transaction: OMSY
Define valuation grouping codes:
- Create grouping codes for similar valuation needs
- Assign to valuation classes
Configure Account Determination
Transaction: OBYC
Define GL accounts for inventory transactions based on:
- Valuation grouping code
- Chart of accounts
- Transaction/movement type
- Business area (if applicable)
Configure accounts for:
- Inventory accounts
- Consumption accounts
- Price difference accounts
- GR/IR clearing accounts
- Inventory adjustment accounts
S/4HANA Account Determination Simplification
In S/4HANA, account determination has been simplified:
- Reduced number of account modification levels
- Streamlined configuration structure
- Enhanced flexibility for multi-valuation accounting
Important Notes on Valuation Configuration
Valuation configuration has direct financial implications and should be carefully coordinated with Finance:
- Align valuation methods with financial accounting requirements
- Coordinate inventory GL accounts with the chart of accounts design
- Consider legal and tax implications of valuation methods
- Test thoroughly with financial postings reviews
Special Procurement Types Configuration
Special procurement types configuration defines how non-standard procurement processes are handled in the system.
Consignment Processing Configuration
Consignment processing involves materials that are physically in your plant but still owned by the vendor until consumption.
Configure Consignment Indicators
Transaction: OMW1
Define special stock indicator K for consignment stock.
Configure Consignment Settlement
Transaction: MRNB
Define settings for consignment settlement:
- Settlement frequencies
- Pricing procedures
- Document types for settlement
Configure Consignment Account Determination
Transaction: OBYC
Define GL accounts for consignment processes:
- Consignment stock accounts (memo accounts)
- Consignment consumption accounts
- Consignment payable accounts
Subcontracting Configuration
Subcontracting involves sending components to vendors who transform them into finished products.
Configure Subcontracting Control
Transaction: OMW6
Define settings for subcontracting:
- Special stock indicator L
- Component provision control
- Component backflush options
Configure Component Tracking
Transaction: OMW7
Define how components are tracked at subcontractors:
- Update control indicators
- Consumption options
- Return processing
Configure Subcontracting Accounts
Transaction: OBYC
Define GL accounts for subcontracting:
- Subcontracting material accounts
- Subcontracting clearing accounts
- Price difference accounts
S/4HANA Subcontracting Enhancements
S/4HANA adds capabilities for subcontracting:
- Enhanced component traceability
- Improved subcontractor stock visibility
- Multi-level subcontractor networks
Pipeline Material Configuration
Pipeline materials are continuously flowing materials like gas, oil, or water that require special handling.
Configure Pipeline Material Indicators
Transaction: OMW8
Define special stock indicator W for pipeline materials.
Configure Pipeline Fill Level Monitoring
Define settings for pipeline monitoring:
- Fill level calculation methods
- Measurement units
- Conversion factors
Configure Pipeline Settlement
Transaction: MRNP
Define settings for pipeline settlement:
- Settlement frequencies
- Withdrawal calculation methods
- Pricing procedures
Stock Transport Order Configuration
Stock transport orders (STOs) manage material movements between plants within the same company or between different companies.
Configure STO Item Category
Transaction: OME5
Configure item category U (stock transport) parameters:
- Receiving plant requirement
- Movement type determination
- GR/IR account indicators
Configure Plant Parameters for STO
Define plant parameters for stock transport:
- Default movements types
- Delivery control
- Goods receipt control
Configure STO Processing Control
Define processing options:
- One-step vs. two-step procedure
- Transit accounts determination
- Valuation control for receiving plant
Configure Cross-Company STO Settings
Additional settings for cross-company STOs:
- Intercompany billing procedures
- Transfer pricing rules
- Tax handling for intercompany movements
Third-Party Processing Configuration
Third-party processing involves vendors shipping directly to your customers while you handle the commercial process.
Configure Third-Party Item Category
Transaction: OME5
Configure item category D parameters for third-party processing:
- Account assignment control
- GR/IR indicators
- Delivery address determination
Configure Sales Order to Purchase Order Link
Define settings for connecting SO to PO:
- Automatic PO creation parameters
- Reference handling
- Document flow configuration
Configure Third-Party Account Determination
Transaction: OBYC
Define GL accounts for third-party processing:
- Expense accounts
- Revenue accounts
- Clearing accounts
S/4HANA Special Procurement Enhancements
S/4HANA introduces several enhancements for special procurement types:
- Enhanced supplier collaboration capabilities
- Improved component tracking with material genealogy
- Real-time special stock visibility
- Simplified intercompany processes