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SAP Cost Estimates and Procurement Type

JJ newSAP cost estimates determine how the material is sourced by the procurement type. Material requirements planning (MRP) guarantees material availability by monitoring stocks and requirements and by generating planned orders for procurement and production. A cost estimate needs data on how the material is procured as the first step in determining material cost. Let’s see how to display procurement types and then look at how cost estimates utilize this information.

The procurement type field is located in the material master MRP 2 view which you access with Transaction MM02 or by following the menu path:

Logistics • Material Master • Material • Change • Immediately

Navigate to the MRP 2 tab to display the screen shown in Figure 1.

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Figure 1: Procurement Type Field in MRP 2 View

To display a list of possible entries for Procurement type, right-click in the field, and select Possible Entries. A list of possible procurement types is displayed as shown in Figure 1.

(E) In-house Production This entry means the cost estimate will search for Production information such as a bill of material (BOM) and a routing. A BOM is a structured hierarchy of components to build an assembly. A routing is a list of tasks containing standard activity times required to build an assembly.

(F) External Procurement This entry means the cost estimate will search for purchasing information usually from a purchasing info record containing vendor quotations for the material.

(X) Both Procurement Types This entry means a planned (proposed) order generated by MRP can be converted into either a production order or purchase requisition. A cost estimate will be based on a BOM and routing if they are available; that is, the procurement type will behave as an in-house production. You can make the cost estimate treat the material as though it’s externally procured with an entry in the special procurement type field, as discussed below.

The Special procurement field found immediately below the Procurement type field shown in Figure 1 more closely defines the procurement type. For example, it may indicate if the item is produced in another plant and transferred to the plant you are looking at. A cost estimate normally follows the MRP special procurement type when determining costs. However, an entry in the special procurement type for costing field in the Costing 1 view as shown in Figure 2 will be used by Costing instead of the MRP setting.

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Figure 2: Special Procurement Type for Costing Field

The special procurement type can be used to over-ride the procurement type. For example, if you enter a special procurement type that contains an external procurement type (F) in configuration Transaction OMD9, the material will behave as if it’s externally procured, regardless of the procurement type setting.

This is idea #25 in my SAP book: 100 Things You Should Know About Controlling with SAP

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