Akila Wedasinghe
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Procurement-to-Pay (P2P) Process
A complete end-to-end visualization of the SAP S/4HANA procurement process
P2P Process Flow
Click on each step to see details about that phase of the procurement process.
The procurement process starts with identifying the material or service requirements.
- Direct Materials: Generated through MRP (Material Requirements Planning)
- Indirect Materials: Created manually by departments
MRP compares forecasts, actual orders, existing stock, and safety stock to identify shortages.
Purchase Requisition (PR) is an internal document specifying what, how much, and when materials or services are needed.
- Not a legal document
- Can be created automatically (MRP) or manually
- Vendor assignment is optional at this stage
- May require approval based on configuration
Source Assignment identifies the vendor to fulfill the requirement.
- Assign existing vendor from Source List/Info Records
- For new requirements, start RFQ (Request for Quotation) process
- Compare quotations and evaluate vendors
- Award business to selected vendor
Purchase Order (PO) is a legal document sent to the vendor, representing a binding agreement to purchase.
- Contains detailed terms and conditions
- Includes pricing, delivery dates, payment terms
- Requires approval based on configuration
- Can be created from PR, contracts, or directly
Goods Receipt (GR) records that material has been received from the vendor.
- Increases inventory (or expense for non-stock items)
- Creates accounting documents
- Can trigger quality inspection
- Updates PO history
Creates Material Document and FI Document.
Invoice Verification validates vendor invoices against GR and PO.
- Three-way matching (PO, GR, Invoice)
- Creates vendor liability
- Clears GR/IR account
- Prepares for payment processing
This is the integration point with Accounts Payable.
Data Categories in P2P Process
Understanding the different types of data in SAP and their lifecycles is crucial for successful procurement implementation.
Created during daily operations; frequently changing operational data.
Reference data that supports transaction processing; updated occasionally.
Organizational units that define the company structure; rarely changed.
System settings that define how processes work; changed with business process changes.
System Integration in P2P Process
The P2P process integrates multiple SAP modules, enabling seamless end-to-end processing.
Production Planning provides requirements that trigger procurement:
- MRP runs identify material shortages
- Purchase Requisitions are created automatically
- Production orders consume materials from inventory
- Planning parameters in Material Master influence procurement decisions
MM is the central module for procurement and inventory management:
- Manages the entire procurement cycle
- Controls material movements
- Interfaces with other modules to ensure seamless integration
- Contains master data for materials and vendors
Materials Management updates inventory levels:
- Goods Receipt increases inventory
- Materials can be restricted (quality inspection)
- Material documents track all movements
- Batch management and special stock types are handled
Accounting impacts of procurement activities:
- Goods Receipt: Inventory account (Dr), GR/IR account (Cr)
- Invoice Receipt: GR/IR account (Dr), Vendor account (Cr)
- Payment: Vendor account (Dr), Bank account (Cr)
- Price differences and other variances are accounted for
Quality inspection during receiving process:
- Goods Receipt can trigger inspection lots
- Material placed in quality inspection stock
- Released to unrestricted use after inspection
- Quality notifications can be created for defects
Special Procurement Types
Beyond standard procurement, SAP supports various special procurement processes:
- Materials stored at your location but owned by vendor
- No inventory value recorded until consumption
- Payment only after consumption
- Less capital tied up in inventory
- You provide components to vendor for processing
- Components sent to subcontractor
- Subcontractor processes/assembles them
- Payment for processing work only
- Continuous delivery of materials (e.g., gas, oil)
- Material continuously flows
- Consumption recorded periodically
- Payment based on consumption readings
- Moving material between plants within organization
- Inter-company: Between different company codes
- Intra-company: Within same company code
- Maintains inventory ownership during transfer
- Vendor delivers directly to your customer
- You create PO to vendor
- Ship-to party is your customer
- You still handle billing and payment
Key Transaction Codes
- ME51N Create Purchase Requisition
- ME52N Change Purchase Requisition
- ME53N Display Purchase Requisition
- ME54N Release Purchase Requisition
- ME55 Collective Release of Purchase Requisitions
- ME56 Assign Source of Supply
- ME21N Create Purchase Order
- ME22N Change Purchase Order
- ME23N Display Purchase Order
- ME29N Release Purchase Order
- ME57 Convert PR to PO with Assignment
- ME9F Message Output for Purchase Orders
- MIGO Goods Movement (Receipt/Issue)
- MIGO_GR Goods Receipt for Purchase Order
- MB03 Display Material Document
- MIRO Enter Incoming Invoice
- MIR7 Display Invoice Document
- MRBR Post Goods Receipt for Purchase Order
- MM01 Create Material
- ME11 Create Purchase Info Record
- ME01 Create Source List
- ME41 Create Request for Quotation
- ME47 Maintain Quotation
- ME49 Price Comparison List