A comprehensive visual guide to understand SAP's special procurement processes
A blanket purchase order (BPO) or framework order simplifies the procurement of Class C materials - low value, non-essential items. Instead of creating individual POs for each procurement, a single BPO with a specified monetary limit is created.
Office supplies like pens, paper, coffee cups, and printer cartridges are ideal candidates for blanket POs as they are low value, non-essential items that are regularly ordered in small quantities.
Blanket POs significantly reduce administrative workload. Instead of creating multiple purchase orders for regularly ordered, low-value items, you can create a single blanket PO with a specified spending limit.
This eliminates the repetitive process of creating individual POs and simplifies procurement for non-critical materials.
A coffee shop chain needs to procure various low-value consumables across multiple locations:
When the cumulative value of invoices reaches the overall limit, the blanket PO is exhausted and no more invoices can be processed against it. A new blanket PO must be created to continue ordering.
In consignment, vendors supply materials that are stored at the buyer's location, but the vendor retains ownership until the buyer consumes them. The buyer only pays for materials when they are consumed.
A steel factory might have coal or iron ore delivered to its site by a mining company. The steel factory only pays for the coal or iron ore as it consumes it in production.
Consignment stock appears as "Vendor Consignment" in stock display (transaction MB52). It's not included in your own unrestricted stock value but is shown as a separate line item.
Double-clicking on consignment stock will show a breakdown by vendor.
A coffee shop needs a constant supply of coffee beans but wants to optimize cash flow:
Process | Standard PO | Consignment |
---|---|---|
Goods Receipt | Creates accounting document (Inventory ↑, A/P ↑) | No accounting document (just quantity change) |
Stock Ownership | Buyer owns stock after goods receipt | Vendor owns stock until consumption |
Payment Trigger | Invoice (MIRO) | Consumption (MRKO) |
Stock Display | Unrestricted stock | Special stock (Vendor Consignment) |
PO Monitoring | Update PO history | No update to PO history |
The goods receipt (step 3) does NOT generate an accounting document because ownership of the materials hasn't changed yet. Only when the materials are consumed (step 4) does an accounting document get created.
Subcontracting is the practice of employing a firm or person outside one's company to do work as part of a larger project or task. It involves assigning or outsourcing part of the obligations and tasks under a contract to another party.
In a subcontracting process, the primary company provides raw materials to a vendor or third-party company. The third-party then processes these materials and returns them as semi-finished or finished products to the primary company.
A company provides 1kg of metal sheet to a third-party vendor. The vendor processes this metal sheet and converts it into a metal box, which is then returned to the primary company.
When raw materials are transferred to the vendor (MVT 541), they appear in stock overview (MMBE) as "Stock Provided to Vendor."
During goods receipt of the finished product, a background movement (543) automatically reduces the vendor's stock of raw materials.
Use MMBE transaction to check stock status throughout the process.
The following accounting entries occur during goods receipt of the finished product:
Note: If standard price is used, PRD (price difference account) may also be involved.
A company needs metal boxes but outsources the manufacturing. The process in SAP:
Non-stock materials are items that are consumed directly upon receipt and are not managed in inventory. While physically stored in a warehouse, these items are considered "consumed" from an accounting perspective as soon as they are received.
Coffee stirrers, stationary supplies, or maintenance supplies that are low-value and don't need inventory tracking.
When non-stock materials are received, the expense is posted directly to the cost center. There is no inventory asset created.
Accounting entry:
DR: Expense (Cost Center)
CR: Accounts Payable
A coffee shop chain needs to manage various office and café supplies efficiently:
Process | Stock Materials | Non-Stock Materials |
---|---|---|
Material Type | ROH, FERT, HALB, etc. | NLAG |
Account Assignment | Not required in PO | Required in PO (usually cost center) |
Accounting at GR | DR: Inventory Asset CR: GR/IR |
DR: Expense Account CR: GR/IR |
Inventory Management | Tracked in stock | Not tracked in stock |
Physical Storage | In warehouse | In warehouse (but "deemed consumed") |
For shared non-stock materials (used by multiple departments), you can distribute costs by percentage across different cost centers using the "Distribute by Percentage" option in the account assignment tab.
Service procurement involves purchasing services instead of physical goods. Services can't be stored as inventory and often can't be fully defined at the time of ordering. Service procurement requires a different approach than material procurement.
Electrical services, HVAC maintenance, plumbing repairs, consulting services, and cleaning services.
Service prices can be maintained in three ways:
A coffee shop needs to repair a broken pump in its espresso machine:
Process | Material Procurement | Service Procurement |
---|---|---|
Master Data | Material Master | Service Master |
Item Category | Standard or blank | D (Service) |
Receipt Process | Goods Receipt (MIGO) | Service Entry Sheet (ML81N) |
Approval Required | No | Yes |
Unplanned Items | Not possible during GR | Possible in service entry sheet |
Unlike material procurement where goods receipt is automatic, service procurement requires formal acceptance by an authorized person. This is because services are intangible and need verification of completion.
Pipeline procurement is used for materials that enter the production process directly from a pipeline or cable and are consumed immediately. These materials are never stored in inventory and are consumed directly as needed.
Oil, gas, electricity, or other fluids/resources delivered through pipes or cables.
A factory needs to track electricity usage supplied directly to its production:
Aspect | Consignment | Pipeline |
---|---|---|
Material Type | Any (ROH, FERT, etc.) | PIPE only |
Purchase Order | Required (Item Category K) | Not required |
Goods Receipt | Required (MVT 101) | Not applicable |
Storage | In warehouse as special stock | Never stored |
Settlement | Through MRKO | Through MRKO |
Pipeline procurement is similar to consignment in terms of settlement (MRKO), but differs in that there is no goods receipt step. Materials are consumed directly from the pipeline without storing in inventory.
Aspect | Blanket PO | Consignment | Subcontracting | Non-Stock | Service | Pipeline |
---|---|---|---|---|---|---|
Material Type | Any | Any | Any | NLAG | Service Master | PIPE |
PO Document Type | FO (Framework) | Standard | Standard | Standard | Standard | Not required |
Item Category | B (Limit) | K (Consignment) | L (Subcontracting) | Standard/Blank | D (Service) | N/A |
Account Assignment | Required | Not required | Not required | Required (e.g., Cost Center) | Required | Required during consumption |
Goods Receipt | Not required | Required (MVT 101) | Required | Required | Service Entry Sheet | Not required |
Stock Management | Not tracked | Special Stock (Vendor Consignment) | Finished goods in standard stock | Not tracked | Not applicable | Not tracked |
Accounting at GR | N/A | No accounting document | DR: Inventory, CR: GR/IR | DR: Expense, CR: GR/IR | DR: Expense, CR: GR/IR | N/A |
Payment Trigger | Invoice (MIRO) | Consumption (MRKO) | Invoice (MIRO) | Invoice (MIRO) | Invoice after service acceptance | Consumption (MRKO) |
Special Features | Monetary limit instead of quantity | Ownership remains with vendor until consumption | Components supplied by buyer | Directly expensed to cost center | Approval required | Direct consumption from pipeline |
Key Movement Types | N/A | 101 (GR), 201/K (Consumption) | Based on process step | 101 (GR) | N/A | 201/P, 261/P, 281/P, 291/P |
Primary Use Case | Low-value, non-essential items | High-volume materials with varying consumption | Outsourced processing with supplied materials | Low-value consumables | Maintenance, repairs, consulting | Oil, gas, electricity |
Main Benefit | Reduced administrative effort | Pay only when consumed | Control of valuable raw materials | Simplified inventory management | Flexibility for unplanned services | Direct consumption tracking |
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