SAP MM PO Item Category

Item Category In Sap Mm Po

In order to acquire materials or services from an external vendor for our company, it is necessary to have a Purchase Order.

The Purchase Order is an integral component of the SAP Procure to Pay (P2P) cycle.

The Procure to Pay (P2P) process begins with a Purchase Requisition (PR) and concludes with the vendor receiving payment.

Purchase Requisition leads to the creation of a Purchase Order, which is followed by receiving the goods and then recording the invoice receipt. Finally, the vendor payment is made.

We will start with configuration of Purchase Order in this post.

We will also explore various kinds of Purchase Orders, their receipt of goods, and the corresponding invoice receipt.

SAP MM Purchase Order Item Category

A purchase order in SAP is a formal agreement that establishes obligations for both the supplier and purchaser. It requires the supplier to provide specific materials or services, while the purchaser agrees to make payment upon receipt of those materials or services.

In SAP, there are various categories of purchase orders that serve different purposes. These include the standard purchase order, stock transport order (STO), consignment purchase order, and subcontracting purchase order.

What does “item category B” mean in a purchase order?

In certain cases, when selecting item category B, the purchase order quantity is automatically set to 1. This means that by default, only one unit of the item will be ordered. Additionally, choosing item category B also disables the need for a goods receipt for the blanket purchase order. This allows for a more streamlined process as there is no longer a requirement to physically receive and confirm the delivery of goods.

To provide further clarity and information about the specific item being ordered, it is important to enter a short text description. This helps in identifying and distinguishing between different items within the purchase order system. The short text should ideally include relevant details such as product name or code, specifications if applicable, or any other pertinent information that aids in accurately identifying and describing the item.

For example: If you are ordering office supplies like pens using item category B, since each pen comes individually packed and does not require separate confirmation upon receipt (goods receipt), you can simply enter “Pens – Pack of 10” as your short text description. This way it becomes clear that you are ordering a pack containing 10 pens.

SAP MM PO: Standard Purchase Order

The regular purchase order in SAP MM does not include any specific types of purchasing such as subcontracting or consignment, where the purchaser is not billed until they actually use or withdraw the materials.

2.1 Establish Document Types for Standard Purchase Orders

Purchase Orders are handled as various types of documents within the SAP system.

For our car business, we will use standard document type “NB” for standard purchase orders

To access the settings for purchase order document types in SAP MM, navigate to SPRO and go to Materials Management. From there, select Purchasing and then Purchase Order. Finally, choose Define Document Types for Purchase Orders.

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Select “NB” and click on “Allowed Item Categories”

Item Category in SAP MM PO

The item category in SAP MM PO determines the level of control over the procurement process for a material or service item.

For instance, the item category plays a crucial role in determining the field selection and whether a goods receipt or invoice receipt should be processed.

The available item categories in SAP MM PO include standard, consignment, subcontracting, third-party, stock transfer, service, material unknown, material group, and text.

-> “Standard” Item Category requires goods receipts and invoice receipts.

-> In “Consignment” item category, invoice receipts are not allowed.

-> For item category “Subcontracting”, components to be provided are presented on a screen.

We have selected three item categories which are allowed with our standard purchase order document type “NB”

Note : Item Categories can not be configured. These are maintained by SAP, therefore we cannot change them. However, we can change the “External Representation” of PO item categories in IMG.

YEL – Customized Inbound Delivery for PPL

Please ensure to review the detailed configuration of inbound delivery types by clicking HERE.

Item Category in SAP MM Purchase Order

Inbound Delivery Intra. Enhanced Store Returns will be created of delivery type “ELR” ECR – Improved Store Returns for Inbound Deliveries

Inbound Delivery cross. Enhanced Store Returns will be created of delivery type “ECR”

Item Classification in SAP MM Purchase Order

The delivery type mentioned is utilized when receiving valued stock in transit. This particular delivery type employs an item category that corresponds to movement type 109.

Creating Standard Purchase Order in SAP MM

Please click HERE to check the step by step BP vendor creation in detail

PO Line Item in SAP MM

The following fields can be filled in the line item of a purchase order (PO): Item Category, Material, Plant, SLOC (Storage Location), PO Quantity, and Price. In this case, the Item Category is left blank as it is a standard PO. The Material code is 66 and the Plant code is PA10. The SLOC is defaulted from the Material Master data. The PO Quantity is 1 piece and the Price is set at 14 USD per piece based on information from an info record.

Please click HERE to check the step by step material creation in detail

PO Line Item Details in SAP MM

There are multiple tabs that provide various information for each line item in a purchase order.

We have the option to choose the specific line item from a drop-down menu in order to view its details, as illustrated in the screenshot below. “Material Data” Tab

In the material category section of SAP MM PO, relevant details regarding weight and volume are transferred from the material master records.

Additionally, the system calculates the total weight and volume of a purchase order by multiplying the weight and volume specified in the material master with the quantity mentioned in the purchase order. “Delivery Schedule” Tab

In the specified tab, the system displays details regarding the delivery date and associated information. For STO (Stock Transport Order), this particular tab presents data on schedule line types along with the committed quantity based on availability checks. “Delivery” Tab

On this tab, the system displays additional details regarding the delivery, such as the allowable tolerance for under-delivery or over-delivery and any reminders. This information is derived from the purchasing value key.

The tab provides crucial details that are explained below.

Item Classification in SAP MM Purchase Orders

The goods will be receipt in “Unrestricted” or “QI” or “Blocked stock” as per the selection here.

The selection of Stock Type can be done manually or, if set up, it will automatically come from the QM view of the material master.

Goods Receipt Indicator in SAP MM PO

This indicator determines whether the receipt of goods is anticipated.

The GR Indicator is automatically set to active when considering the Item Category and Account Assignment Category.

For Standard Item Categories without an Account Assignment Category, the Goods Receipt (GR) Indicator is automatically included.

For Account Assigned Purchase Orders, the default settings are determined by the configuration of the Account Assignment Category.

c) Goods Receipt, Non-Valuated

Indicates that the valuation of goods received for this item will not be done during the goods receipt process. Instead, it will be evaluated at the time of invoicing.

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The item category in SAP MM PO is determined based on the configuration of the account assignment category.

d) Delivery Completed” Indicator

If this option is chosen, it indicates that the system does not anticipate any additional deliveries for this item, meaning that the item is considered closed. “Invoice” Tab

The item category in SAP MM PO determines whether an invoice receipt is anticipated for the purchase order item.

If the indicator for invoice receipt is not activated, the goods must be provided at no cost.

Specify the external representation of item categories in the Control invoice receipt section.

In SAP MM PO, the item category for account assigned purchase orders is determined by the account assignment category.

Final Invoice Flag in SAP MM PO

This signifies that the most recent invoice for a product has been received from a vendor and no additional invoices are anticipated.

GR-Based Invoice Verification Indicator in SAP MM PO

The indicator determines whether the invoice verification for a purchase order item or invoice item is based on the goods receipt.

If the indicator is chosen, it signifies that the invoice for the item in the order can be inputted by referring to a GR document or by entering a delivery number during goods receipt.

Enabling the GR-Based Invoice Verification Indicator results in the creation of individual invoice items for each goods receipt.

This involves verifying the correctness of the price and other details mentioned in the invoice at the item level.

Tax Code in SAP MM Purchase Order

In the SAP MM PO system, a specific tax code is assigned for each country. This tax code is used to store the applicable tax rate and perform calculations. In the case of India, an exclusive tax code is specified to meet the taxation requirements in that country.

The tax code in the purchase order tab is determined automatically based on the configuration settings. Likewise, the system also calculates the tax amount automatically.

Please refer to the following article for a comprehensive guide on the process of input tax in MM.

Configuring SAP S4 HANA MM Tax can be done in a simple and straightforward manner by following seven easy steps. By implementing these steps, users can easily set up the tax functionality within the SAP system. “Conditions” Tab

Please click HERE to see PO Price components in details “Delivery Address” Tab

In this section, the delivery address, which is usually the address of the plant, is automatically copied from the configuration of the plant and displayed.

Picture : “Delivery Address” Tab Please note highlighted “Supplier” with “SC Supp” fields in the above screenshot, which can eliminate one step from the subcontracting purchasing cycle.

If we select this indicator and input subcontracting supplier , then system directly provide the purchased materials to the subcontractor , which can be seen as special stock “O” in the stock reports of the plant.

Instead of using MIGO, we need to generate an inbound delivery for the goods receipt process.

Item Grouping in SAP MM Purchase Order

In order to proceed with the goods receipt, it is necessary for us to generate an inbound delivery and carry out the required actions accordingly.

Inbound Delivery Creation in SAP MM PO

Snapshot: Commencement of creating an Item Category in SAP MM Purchase Order.

Snapshot: Creating an Item Category within SAP MM Purchase Order displayed on the subsequent screen.

Please note Item category is determined as “YELN” in the above inbound delivery.

-> Please click HERE to check “Receiving Point” determination configuration in Inbound Delivery

-> Please click HERE to check Item category “YELN” determination in Inbound Delivery

Display Inbound Delivery in SAP MM

Clicking twice on the inbound delivery will lead you to the display of the inbound delivery VL33N in the system.

Item Categorization in SAP MM Purchase Order

The process of receiving goods based on inbound delivery consists of two main steps. The first step involves storing the goods, while the second step is completing the Goods Receipt.

To begin, open the VL32N transaction and enter the delivery number. Press the enter key to proceed.

Kindly ensure that you store the entire quantity of the delivery to proceed with the goods receipt process.

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If there is a smaller quantity available for put-away than the delivery quantity, update the delivery quantity to match the available quantity.

Item Segmentation in SAP MM Purchase Order

As soon as inbound delivery put-away quantity is entered , put-away status is changed from “A-For put-away” to “C-Compl. put away”

Now press on “Post Goods Receipt”. Goods Receipt is completed

Upon the completion of goods receipt, inventory is updated and financial postings are automatically made in the relevant accounts. To understand the full implications of a goods receipt, please refer to the following post.

Comprehensive instructions for setting up the integration between S4 HANA MM and FI. Create original content in English for India without elaborating on the subject matter.

Invoice Verification in SAP MM PO

After PO & Good receipt, the next step in P2P cycle is invoice verification

As the invoice receipt indicator is chosen in the purchase order (derived from the item category), it indicates that an invoice is required for this particular item.

Kindly refer to the following post for information on how to configure and test invoice verification.

Configuring logistics invoice verification in SAP S4 HANA involves setting up the necessary settings and parameters to ensure smooth processing of invoices. This process ensures accurate matching of invoices with purchase orders and goods receipts, enabling efficient payment processing.

Determining the item category in a sales order

The item category in SAP MM PO is determined by the system using various factors. These include the sales document type, the item category group of the material, the higher-level item category, and the usage of the item category.

When creating a purchase order (PO) in SAP MM, the system automatically assigns an appropriate item category based on these criteria. The sales document type indicates whether it is a standard order, rush order, or any other specific type. The item category group of the material classifies it into different categories such as finished goods, raw materials, or services.

Furthermore, if there are sub-items within an order that have their own characteristics or requirements, they may have a higher-level item category assigned to them. This helps in organizing and managing complex orders with multiple levels of items.

Additionally, each item category has its own usage defined in SAP MM. For example, some categories may be used for pricing purposes only while others may be used for inventory management or delivery scheduling.

What does item category mean in SAP?

An item category plays a crucial role in determining the suitability of an item for billing or pricing purposes within SAP MM PO. It serves as a means to define additional control functions for sales documents. For instance, the functionality of a standard item greatly differs from that of a free-of-charge item or a text item.

The use of different item categories allows businesses to effectively manage their sales processes and ensure accurate billing and pricing. Each category is assigned specific attributes and behaviors that align with its intended purpose. This classification enables organizations to streamline their operations by categorizing items based on their characteristics, such as whether they are chargeable, non-chargeable, or simply informational.

P.S: The proper utilization of appropriate item categories not only facilitates efficient handling of sales transactions but also ensures accurate financial management within SAP MM PO.

The 4 PO types in SAP

In SAP MM, the item category plays a crucial role in purchase orders (POs). It helps classify different types of items based on their characteristics and requirements. There are several item categories available in SAP MM, including standard, subcontracting, consignment, stock transfer, and external service.

The standard item category is used for regular procurement of goods or services. It is applicable when purchasing items that do not fall into any specific category like subcontracting or consignment. This category allows for normal procurement processes to be followed.

Subcontracting item category is used when outsourcing certain operations or tasks to a third-party vendor. In this case, the vendor performs specific activities on behalf of the company using materials provided by them. The subcontractor may need to return some finished products back to the company as per the agreement.

External service item category applies when procuring services from external vendors rather than physical goods. These services could include maintenance work, consulting services, repairs, etc., which require specialized expertise outside of what can be handled internally.