Master Data is the lifeblood for any organization that uses an Enterprise Resource Planning (ERP) system such as SAP ERP. In this blog series we will discuss some of the challenges associated with creating and managing master data and in particular material master data.
This first blog in the series will provide some basic background and definitions for some of terms we will be using throughout this blog series. This is especially important for those folks who may not be familiar with all the business processes where material master data is used.
Most successful companies use enterprise systems to complete the work needed to achieve their goals whether it is creating and delivering products or providing services to their customers. Companies have spent enormous amounts of capital to implement enterprise systems such as SAP ERP to allow them to manage a business process from beginning to end in an integrated and consistent manner.
One of the main goals for implementing an enterprise system is to improve efficiency by removing major obstacles to sharing and accessing information across functional areas. SAP ERP is one of the most complex Enterprise Systems and focuses on operations that are performed within an organization.
It is quite common to refer to a specific set of functionality as a functional module in SAP. For example, a person well-versed in Material Management is called a MM Expert or an SAP MM Functional Expert. There are many modules in SAP that are designed to perform a specific business function within an organization. Some of the examples are Production Planning (PP), Material Management (MM), Sales and Distribution (SD), Financial Accounting (FI), etc.
It is also important to get a basic understanding of how the data is stored and organized in SAP ERP. There are basically three different types of data namely organizational data, master data, and transaction data. In this blog we will focus on Master Data and in particular Material Master Data.
Material Master Data is the most utilized and hence most important data in SAP and is used to store all the data for a material in SAP. This data is also made available to a number of processes such as Material Management, Procurement Process (Procure to Pay), Fulfillment (Order To Cash), Inventory and Warehouse Management (IWM), Production Planning (PP), Shipping and Quality Management.
In order to manage a vast amount of data, material master data is organized in different tabs or categories commonly referred to as Views. Each view stores data specific to a particular business function.
For example, views related to a purchasing process are basic data, financial accounting, purchasing, and plant/storage data. The views related to fulfillment process are basic data, sales organization data, and sales plant data. The views related to Production are Material Resource Planning (MRP) and work scheduling for each plant. Similarly, the view related to Warehouse and Inventory management is Warehouse Management.
Figure 1: Material Master Views/Categories
As you can see from the above diagram, the Material Master data is comprised of data that relates to a number of different areas. For materials to be used successfully, the data has to be collected and entered into the Material Master record.
Not only does the data have to be entered for those areas but also for the specific organizational areas: plants, storage locations, sales organizations, and so on. For example, a material cannot be purchased without the relevant purchasing data being entered.
In addition, there are different type of Materials each with its own set of complex business rules. The most common material types are Finished Goods (FERT), Raw Material/Components (ROH), and Semi-finished Goods (HALB).
Now let’s discuss the Master Data that is relevant for Production Order Process. These are bills of material (BOM), work centers, product routings, and production version. BOM is also sometimes referred to as a recipe depending on the industry. BOM identifies the components that are necessary to produce a material. Routings identifies the operations needed to produce the material. Work centers, as the name suggests, are where the operations are to be performed. A Production version combines a BOM and routings for a material.
Finally, I’ll cover the Master Data that is needed for costing a material. The Master Data for product costing includes (Material master data [Costing view, MRP views], BOM and Routings).
The first step is to create material cost estimates. The Material cost estimate is calculated for all the in-house manufactured products (finished goods and semi-finished goods). The system accesses the Bill of Material and Routing for the finished goods. It is used to calculate the cost of goods manufactured and cost of goods sold for each product unit. Steps that follow the cost estimate are marking and releasing the cost estimate. Finally, the last step is to indicate in SAP that the material is live.
This completes a brief overview of the material master data and some of the major processes that are involved in an end-end process of creating a material in SAP. In the next blog we will discuss some of the challenges associated with creating and managing material master data in SAP ERP.
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