SAP ME21N Tutorial – Creating PO’s with SAP step by step

SAP ME21N Tutorial – Creating PO’s with SAP step by step

ME21N Tutorial - Step by Step - Title

SAP & Supply Chain

SAP is a very useful tool whenever it comes to managing your manufacturing supply chain. At the time of writing this, I am working as a supply chain analyst and purchaser in my rotational training program with the Prysmian Group. I’ve learned a lot about supply chain during my time working in this role. One of the most important things I’ve learned, is being able to accurately and timely manage your inventory levels. I’ll explain the process below for how to make the decision of placing a purchase order for more material or not & how to use SAP to get this information.

Information for Purchase Order Creation - Diagram
Information Needed to place Purchase Order

What you need to effectively purchase

Three things must be considered whenever you’re trying to decide if you need to place a purchase order to receive more material.

First you need to consider your Safety Stock and Reorder Point. Your reorder point and SS levels have most likely been predetermined by your supply chain manager. If you do not have these, you’ll have to make educated decisions along the way. Even with these, you should never blindly create purchase orders off these. A supply chain is a very dynamic beast to try to conquer.

The second thing you should consider is your current inventory level. Does your current inventory level fall below your reorder point? If so, it’s probably time to create a purchase order. Does it fall below the reorder point if you remove the safety stock from the inventory?

Safety Stock is a buffer to smooth out a supply chain if orders for a certain product are higher than expected, or if a supplier of this material suddenly becomes unavailable to supply this raw material. Think of it as a safety net to ensure that you can always fill your own customer’s demands.

If removing the safety stock form your inventory value causes you to fall below your reorder point, it again may be time to place a purchase order.

But what if it’s not that simple?

Like I already stated, you should never blindly place purchase orders for a material. This is why SAP is a valuable tool to have. SAP can generate purchase Requisitions, which is essential a big red flag saying “Hey you should buy more of this material.” But what considerations go into these? Well, we already discussed Consumption, ROP & SS, and current inventory, but each of those need to be broken down into a more catalysts.

Criteria for SS and ROP

How are Safety Stocks & Reorder Points Determined?

Without going crazy in depth, safety stocks are determined by considering the level of availability that you want to provide to customers. Do you want to be 99% certain of having products that you customers want? Then you’ll likely need to have a fairly high safety stock. Let’s visualize a graph to understand this best :

Variability in Consumption Values

Consider the above graph to be the consumption, or how much you use to produce your products, over time in your manufacturing facility. It is very obvious to see that you have some spiking in the consumption of this material. But what happens in month 4, 8, and 11, that causes this spiking? Sometimes it’s hard to tell and nearly impossible to predict. Even some of the best machine learning models cannot predict these consumptions. This is because in order to predict, you have to be predictable. The word “Predictable” here means that there has to be some sort of trigger that causes the correlation. If something is truly random, then you’ll never be able to predict the consumption. It would be like trying to predict the flip of a coin.

If you think your data is predictable, check out my machine learning post to begin predicting stock levels Here.

The Use of Safety Stock

Safety stock is used in this case to account for these spikiness in consumption that you are unable to predict. Ideally, you want to have the minimum amount of safety stock available – this is a big problem in supply chain analytics. The thing is, the smaller the safety stock, the more of a gamble on your availability for customers. At the end of the day, which is more value for your business, the customer satisfaction, or the liquidity of not having a large inventory of safety stock? This is something you have to answer in a case by case basis.

Lastly, you may want to keep safety stock on hand because of the difficulty of manufacturing the raw material into the product that you’re selling. Does this raw material break often in the manufacturing process? Would the material breaking cause you to be late if there was no more material available? This is another consideration you need to make in determining your safety stock.

Expected Consumption Diagram for Supply Chain

One can predict Consumption values in a lot of cases, which can help in your decision to create a purchase order or not.

Forecasting tools are a supply chain analyst’s best friend. A lot of supply chain is data and statistics. If you can predict your consumption values within a satisfiable percentage, you can begin placing purchase orders for those amounts. This is working off a forecast.

Current Inventory Diagram - SAP Purchasing

Determining Available Inventory 

Lastly, the breakdown of your current inventory is important as well. How much of your inventory is actually unrestricted and ready to be used if the situation arises? How much is already work in progress, or WIP? LAstly, you may already have a purchase order out for this material. This needs to be considered too, as placing multiple PO’s may create an over stock situation and tie up your liquidity into items you may not use for months to come.

Using SAP to collect information and Create a PO.

Step by step of ME21N PO creation.

First, go ahead open SAP and login. Then, execute the transaction ME21N. You will need to be in a role of purchaser to do this, as access to this transaction means you’re able to create, edit, and delete purchase orders. You should arrive at a screen that looks like the above.

Next, go ahead and click “Document Overview On” towards the top of the screen. This will display either your purchase requisitions, or created purchase orders.

SAP ME21N Document Overview On
SAP Document Overview - ME21N Page

 

In my case, it has displayed the PO’s I have already created. This is fine, but it’s not what I need. SAP works off a purchase requisition conversion to purchase order.

A purchase req is essentially saying “HEY, we think we need this!!” and the purchase order is the document you would send to a supplier to actually purchase the material. So, we want to see the purchase Req’s, this is what we want to work off of.

Changing ME21N to Purchase Requisitions
Changing from PO to PR

Click on the variant icon. (It looks like a flower to me.) Then go all the way down to the “Requisitions” option at the bottom of the drop down menu. Click on this.

You should now pull your requisitions up. There’s an art to this too. If you see no purchase req’s you’ve either already got this supply chain thing figured out and no longer need to buy anything, or your variant isn’t set up successfully. I would be willing to bet on the latter.

I’ll write another tutorial for the variant {Place holder for link in the future} But let’s carry on with this tutorial for now.

 

 

 

Opening up one of those menus, we now are faced with a large list of suppliers who my company purchases raw materials from.

SAP Vendors List in ME21N

 

 

Clicking the drop down of one of those suppliers, we have a list of raw materials that currently have purchase reqs. Here, SAP is saying that it thinks we need all the materials listed. Thankfully, I have yet to be fired – and I think I would be if I dropped the ball on this many raw materials. So let’s go through the process of determining if we actually need to purchase these or not.

Purchase Requisition in SAP ME21N
Opened Purchase Requsition

 SAP ME21N Material Specific Instructions

Choosing one material, we can double click on it to open up the req. The purchase req will tell us a date that we need to have the material, the quantity that we need to have, and the location of where it’s needed.

ME21N Quantity to Purchase

Zooming in, for this specific material, SAP is saying that we need to purchase 6,002 FT exactly to satisfy some requirement, whether this req is generated because of a reorder point, Dependent demand, or something else, we’ll have to determine manually.

Specified Delivery Date

SAP is also super useful in the sense that it tells us the delivery date we should request. This is generated from the lead time set on the material master list. I’ll show you how to view this later in the tutorial. SAP is also super useful in the sense that it tells us the delivery date we should request. This is generated from the lead time set on the material master list. I’ll show you how to view this later in the tutorial.

Lastly, It also tells us the Material in question. Go ahead and click on this slow and copy the contents to your clipboard.

Raw Material Number SAP ME21N

Creating a New Session

SAP Create Session

I always leave this screen open for reference as I go through the entire process. So, I go to the top of my SAP interface and select system > Create Session. This opens a new SAP window.

Determining Inventory, Historical Consumption, and material information

MD04 SAP Transaction Screen

The most helpful transaction that I use to determine a lot of the information in creating a purchase order, is SAP transaction “MD04”

Raw Material SAP MD04 Transaction Screen

Once you open MD04 enter your material into the material blank and execute the transaction.

Raw Material Default MD04 Screen display SAP

The first screen will take you to the default location of what your account is associated with. Sometimes this is the information that you need,  other times you may need to view a different plant or MRP location. Do this by selecting the MRP area below the material.

MD04 SAP Default Location
SAP MD04 Location Selection

Once we select the icon next to the location, we are given a list of everywhere within our business that we can find this specific material. The location I’m specifically interested in is the MRP001 – These are the materials I’m creating purchase orders for, so I need to take care of this location.

SAP MD04 Right Location

Once selecting that location, I’m given the information for my location.

I can see the stock amount, the amounts of PO’s that are established as going to this location, their dates, and the purchase req’s that are causing this material to show up on our ME21N screen.  Next we’ll want to find out more information for this specific material.

SAP MD04 Double Click Material

Do this by clicking the blank of where the material is listed twice. This will open up this screen.

Material Specific Information

MRP MD04 Raw Material Information

Depending on how your material is set up, to see accurate information, you’ll either need to use the “MRP areas” button at the bottom of the window, or stay on the current window. Since my material is listed as an MRP material, this information will be in the “MRP areas” submenu.

 

Clicking this button yields the following screen.

MD04 MRP Areas Button in SAP

My part is in MRP001, so I’ll double click on this MRP area blank highlighted in the picture.

Material Information in SAP

This screen will provide us important information to why these req’s are being created. The first thing we need to acknowledge is the designated reorder point and maximum stock level for this material. We see this in the MRP 1 tab.

Consumption Values

MD04 Consumption Values

Next, we can view the Consumption Values tab to see how much of this material we have consumed in the prior months. I’ve excluded mine from this post for business intelligence reasons. I don’t think our consumption values for this one cable are too crucial, but I’d rather not chance it.

Lead Time

Next in the MRP 2 Tab, you’ll be able to see your planned Deliv. Time. Our’s probably isn’t right for this material at 2 days, but hopefully yours will be. This will allow you to see how much you’ll likely consume before you can get more material.

Analyzing the Inventory you think you have

Remember how I stated that there are multiple components of determining the inventory you have? We’ll need this information next. We can get this information from the SAP transaction MMBE

After entering this transaction into a new window, we’ll arrive at the following screen.

MMBE Transaction SAP
MMBE Item location by work cells in SAP MMBE

Enter the material that you’re questioning into the material blank on the MMBE screen. Indicate your plant if it isn’t set up in your defaults and hit the execute button in the top left.

SAP Inventory Locations

Now, you’ll be given a breakdown of where all this material is located. My Warehouse is location ‘0001’ – This is typically where we would store material that is not about to be used. You can see from this screen that all this material has been transferred to a working cell within the plant. In my scenario, this likely means that we’re about to be completely out of this material. Which could mean trouble if we have another production order coming up. Remember, we can see this in the MD04 transaction to see if another PO for this material will be arriving soon.

But how can we check if another production order is coming up on this material? We can use the product view of SAP.

Upcoming Production

Upon entering product view, we’ll place the material we’re questioning in the product blank. Then we’ll specify the location and execute this. Don’t be deceived into thinking the above information pertains to you. It pertains to the location of default, which may or may not be the information you’re interested in.

Industry 4.0 in Manufacturing - Enterprise Resource Planning

Executing product view for my location, we can see a lot more movement going on with this material. We see OrdRes ‘s & DepDmd which will both consume material. This will give us an idea of what we need and when. So let’s say we need to create a purchase order for this material. How would we do this?

Creating a PO in SAP 

 

Navigate back to your screen ME21N and select the option of “Create” at the top, or hit F6

Create a PO in ME21N Screen
New Create Purchase Order Session in ME21N in SAP

This will pull up a screen with many blanks like this.

SAP ME21N Purchase Order Filled in

You’ll need to fill in all of these blanks to make a complete PO.

Steps of Filling in a SAP Purchase Order

  1. Fill in the vendor with the vendor code that your business has established for the supplier
  2. Enter your purchasing group, mine is my initials, DMS
  3. Enter your company code
  4. Next put in the material you’re buying from this supplier.
  5. Now, enter the quantity of the material that you’re purchasing and the delivery date your requesting

The price per unit should auto fill from the material master, but if it doesn’t, you’ll need to track down the cost of this material. The bet way I have found is through the SAP transaction ME80FN to view previous PO’s created for this material. Unless of course, you’re the first one in your company to ever place a PO for this material. In that case, you’ll have to contact your supplier to see how expensive this material is.

Finally, you’ll need to scroll to the right and enter the location of where you want this material to be delivered to.

SAP ME21N Messages Tab

Clicking this will open another window.

SAP ME21N Messages Tab

We want the external send option to be there. This will send us an email of the purchase order, which we can then forward on to the supplier. This will be sent to us once we save the document. Which we still need to do one last thing before saving.

Select the delivery/invoice tab and specify your incoterms. This is used inter – company to specify who and how we pay for shipping.

ME21N Creating PO incoterms for supplier Shipping

Saving your Purchase Order

Now, you’re finally ready to save your purchase order by clicking the floppy disk.

Saving Purchase order in ME21N SAP

This will email you a purchase order for the quantity and material you specified. We would then forward this to a supplier to place our purchase with them.

Final Thoughts

If you’ve made it to the end of this tutorial, you’re probably functioning as apurchaser at your business. I just want to offer you a few words of encouragement. Although you’re probably only noticed whenever the material isn’t in house, your job directly impacts every other function in the business. If you get extremely good at this position, there is more upside here than most others. You have a direct impact on the liquidity of your business, the efficiency of your manufacturing lines, and the ability to give people jobs. 

Stay motivated, keep going, and connect with everyone to excel in a purchaser role. 

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