MM BBP KCL

4 Materials As Is Business Process and Business Requirement from Kajaria Management

To Be Business Process for Kajaria

PROJECT Mission Online 3

Sign-off on Business Blue Print

3. Materials Management Implementation of mySAP ERP by SEAL InfoTech (P) Ltd. for Kajaria Ceramics Ltd

Steering Committee Member, Kajaria

Steering Committee Member, Kajaria

Mr. Amit Gupta Project Manager, SEAL Infotech (Pvt) Ltd.

Mr. Rajesh Mahajan Consultant, SEAL Infotech (Pvt) Ltd.

Steering Committee Member, SEAL Infotech (Pvt) Ltd.

Mr. Anil Singh Project Manager, Kajaria Ceramics Ltd

Prem Kumar Key User, Kajaria

P.N. Pareek Key User, Kajaria

Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

Page 1 of 73



Introduction This Business Blue Print Document describes the following:

•

Enterprise Structure of Kajaria Ceramics LTD.,

•

Business requirements as given by the Kajaria Key Users

•

Suggestions by SEAL consultants wherever mySAP features are found to be useful to Kajaria’ s business functionality

•

To-Be Process on mySAP system suggested by SEAL Consultants

•

Comments whether the requirement can be realized on the mySAP system or not.

•

Gaps which are at different stages of exploration

The following codes are given to each module that is within the scope of the agreement:

Module ID

Module

1

Financial Accounting

2

Controlling

3

Sales & Distribution

4

Materials Management

5

Production & Planning

6

Plant Maintenance

7

Quality Management

8

Payroll

Further processes, sub-process and activities in each module are denoted by, say. 1.1, 1.1.1, 1.2.1 etc.


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A Business Blueprint document is prepared for each module and reference shall be made wherever required to other modules, whenever there is an overlap of business processes across modules or a business process requires to be completed in more than one module. The reference to the business process shall be made using the process numbers as described above;

For e.g.: As per the above notation, all processes in Sales and Distribution start with 3.*… So if a reference has to be made to process in Accounts Receivable of Financial Accounting, then the reference is made using the notation say, 1.2.*… where ‘1’ refers to Financial Accounting and 1.2 refers to Accounts Receivable and then further numbers denote the sub-processes and activities in the module. Step 1: The Module Owner shall identify various existing business processes at a broad level and make a list of them as described under section 1 of this document

Step 2: Depending upon the various business processes thus identified in Step 1, various business scenario are described in the following way: As Is Business Processes: The current way of executing the business process shall be explained in detail with data/information flow along with the IT systems / Manual Systems being used in the whole cycle. Business Requirement: Under this head, the module owner shall describe the requirements of the company vis-à-vis this business scenario, if necessary with examples. Following situations can arise: (a) The current provisions in the system are sufficient enough and additional configuration efforts are not required. (b) The current provisions are not sufficient and satisfactory and additional features need to be incorporated in the system (c) There is no current provision to handle this transaction at all. The module owner shall identify each business scenario with the above classification.

Step 3: Based on the Business Requirement, SEAL consultant shall do a detailed Suggested Business Process and based on the analysis, shall propose the best fit business process on the mySAP Business Suite system. It may not be possible to decide the realization possibility of all Business requirements on the mySAP Business Suite immediately and hence the following legend is being followed for describing the statuses:


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Status of To-Be Business Process


Status Description

A-Possible

Can be implemented on mySAP ERP 2005

B-Possible with workaround

Can be implemented on mySAP ERP 2005 through indirect means

C-Possible with ABAP

Can be implemented on mySAP ERP 2005 through ABAP/4 development

D-Possible with ABAP (But performance issue)

Can be implemented on mySAP ERP 2005 through ABAP/4 development but system performance may be effected

E-Not possible with out Major Modification

Cannot be implemented on mySAP ERP 2005 without major system modification

F-Open for exploration

Possibility of implementation will be explored in the development environment. Cannot be confirmed at this stage

G-Not possible

Cannot be implemented on mySAP ERP 2005

H-Not in Scope

Cannot be implemented because it is not part of the scope defined in the “Software Services Agreement” between SEAL and Kajaria Ceramics Ltd.

The To-Be business process realization is dependent on the following aspects:



Scope of services described in the Software Services Agreement signed by Kajaria Ceramics and SEAL



Scope of functionality described in the Software Services Agreement mentioned above.



Capabilities and Limitations of mySAP ERP 2005



As-Is Business Knowledge Transfer from Kajaria Ceramics Project Team members



Business Requirements defined by the Kajaria Ceramics Project Team members

Kajaria Ceramics accepts that the decision to accept the ‘To-Be’ Business Processes is completely its own and not influenced by SEAL. SEAL shall not be responsible for the business consequences on Kajaria Ceramics Ltd. after the realization and usage of the processes being suggested here.


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Kajaria Ceramics shall indemnify SEAL from all responsibilities for any other business consequences during the framing of the To-Be Business processes, or at any time during or after the realization / implementation of these processes on mySAP ERP 2005 or while using the system. Methodology to be adopted for preparing Business Blue Print:


Page 5 of 73



Contents

#

Topic

Page Numbers Start

End

0

Process Scope – List of Business Processes

6

7

1

Material / Services Range and Procurement Types

8

9

2

Enterprise Structure

10

13

3

To-Be Business Processes / Master data

14

70


Page 6 of 73


0.


Process Scope – List of Business Processes

Process Id

Process Description

4.1

Master Data Maintenance

4.1.1

Material Master Maintenance

4.1.2

Shipping Instructions

4.1.3

Purchasing Value Keys

4.1.4

Service Master Maintenance

4.1.5

Vendor Master Maintenance

4.1.6

Purchasing Info Records

4.1.7

Source List Maintenance

4.1.8

Maintaining Vendor Evaluation Criteria

4.1.9

Maintaining Conditions

4.1.10

Payment Terms

4.2

Material Requirement Planning

4.3

Procurement Process

4.3.1

Purchase Requisition

4.3.2

Approval of Purchase Requisition

4.3.3

Request for Quotation

4.3.4

Quotation

4.3.5

Purchase Order Creation

4.3.6

Purchase Order Approval

4.3.7

Purchase Order Follow-Up

4.4

Gate Pass for Entry & Exit of Goods

4.5

Goods Receipt

4.5.1

Tolerance limits for goods receipt


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4.5.2

Goods Receipt against Stock Transport Orders

4.5.3

Goods Receipt against Service Orders

4.5.4

Goods Receipt against Subcontracting Orders

4.5.5

Screen manufacturing

4.5.6

Goods Receipt of Customer Returned Materials

4.5.7

Rejection Handling while GR

4.5.8

Excise Transactions while GR

4.6

Goods Issue

4.6.1

Goods Issue to Production

4.6.2

Goods Issue to Consumables

4.6.3

Goods Issue to Capital Items

4.6.4

Goods Issue against Subcontracting Orders

4.7

Scrap Handling

4.8

Logistics Invoice Verification

4.8.1

Invoice Variance and Vendor Invoice Block

4.8.2

Releasing Blocked Invoices

4.8.3

Subsequent Debit/Credit

4.8.4

Delivery cost- Planned/Unplanned

4.8.5

GR/IR Account Maintenance

4.9

Physical Inventory

4.10

Vendor Evaluation



Page 8 of 73


1.


Material/Services Coverage & Different Types of Procurement

Procurement at Kajaria covers the following items: •

Raw Material required for Production

•

Packing Material and accessories required for Packed Finished Products

•

Engineering / Spares item & Consumables

•

Services with Material Supply Repairs etc

Kajaria makes the following type of purchases: 1.

Procure-to-Stock

2.

MRP based Procurement

3.

Need-based Procurement – based on Purchase Requisition

4.

Capital – Projects / General

5.

Services

6.

Service with material supply – Job work

7.

Cash Purchase

Brief Explanation of each type of Purchase: 1.

Procure-To-Stock In case of Procure-To-Stock type, the re-order level for each material is maintained by stores department. Stores create purchase requisitions. It goes through approval process. Further, a purchase order is prepared with reference to PREQ, approved by Purchase Committee and send to the concerned vendor.

2.

Purchase Requisition based In case of purchase requisition based purchases, concerned departments raise a purchase requisition, which is approved by their respective Hod’s. Then the purchase checks for available sources of suppliers and price of that material is enquired with various sources, based on Price, Quality and delivery a best possible vendor is selected and the final quotation goes through a approval process. Then the PO document is finally prepared and approved and sent to the vendor.

3.

Capital Items For capital purchases, the purchase requisitions is raised by the concerned dept and it’s approved by concerned authorities and then purchase dept obtains different quotes from various sources and compared the best quote as final quotation and it’s goes through approval process. The Purchase then prepares a PO and it’s approved by Purchase Committee.


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4 Materials As Is Business Process and Business Requirement from Kajaria Management 4.


Service Purchase Orders with Material Supply/ Job work Orders Sub-contracting / Job work Orders are created on service providers in case where Kajaria needs to get its material processed from service providers due to lack of that service capability / capacity with in KCL. After processing, KCL will take back the entire processed material.

5.

Services Services are performed by various vendors, either at in house or outside the factory by creating the purchase orders with required terms and conditions and the applicable service charges shall be paid to the vendor, after satisfactory performances.


Page 10 of 73


2.


Enterprise Structure

Plants (under Company Kajaria Ceramics Ltd.) Current Code

Description

New Code

Description

Justification / Purpose of the Organizational Unit

Sikanderabad Plant

1100

Kajaria Sikanderabad Plant

Kajaria’s Floor Tiles Manufacturing facility at Sikanderabad

Gailpur Plant

1200

Kajaria Gailpur Plant

Kajaria’s wall Tiles Manufacturing facility at Gailpur

Kajaria’s Delhi Depot

2100



Kajaria’s Jaipur Depot

2200



Kajaria’s Mumbai Depot

2300



Kajaria’s Kolkata Depot

2400



Kajaria’s Cochin Depot

2500



Kajaria’s Chennai Depot

2600


Kajaria’s Chennai Depot

Kajaria’s Bangalore Depot

2700



Kajaria’s Ahmedabad Showroom

3100



Kajaria’s Gurgaon Showroom

3200



Kajaria’s Mumbai Showroom

3300



Kajaria’s Bangalore Showroom

3400



Note: - The Depots and Showrooms will be treated as Plant location. The exact details of upcoming depots to be given by Kajaria Team.


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Storage Locations


Page 12 of 73


Current Code

Description

New Code

Description



Raw materials – Bin

ST01

Storage of raw materials


ST02



ST03



ST04



ST05



ST06



ST07



ST08



ST09



ST10



ST11



ST12



ST13



ST14



ST15



ST16



ST17



ST18



ST19


Raw materials – Bin(OUTSIDE)

ST20


Glazed Raw Material

ST21

Glazed Raw Material


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Glazed Raw Material

ST22

Glazed Raw Material

Pigments and stains

PS01

Pigments and stains

Packing Materials

PM01

Pack Mat (Plant)

Storage location of packing materials

Finished Goods

FG01

FG (Plant)

Storage of finished goods

LPG

LPG1

LPG Storage Location

Storage of LPG (cylinders)

LPG BULK

LPG2

LPG Storage Location (bullet)

Storage of LPG (In bullet)

Engineering & Spares

ES01

Engg/Spares Storage

Storage of engg and spares

High Speed Diesel

DST1

HSD Storage

Storage of HSD

Furnace Oil

FO01

Furnace Oil Storage

Furnace Oil Storage

LDO

LDO1

LDO Storage

LDO Storage

Note: Codification for the storage locations, yet to be given for C&F and head office by the Key User

Purchasing Organization Current Code

Description Purchase Department

New Code 1000

Description Kajaria Purchasing Organization

Justification / Purpose of the Organizational Unit Centralised Purchasing Organisation for Kajaria

Note: KCL will decide whether the purchase group is required at depot and showroom level. The decision to have number of Purchase Group required Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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in KCL is to be finalised. Purchase Group Current Code

Description

New Code

Description


Factory Operations, Sikandarabad

Sikandarabad Factory Operations

Factory Operations,

Factory Operations, Gailpur

Gailpur Factory Operations

Factory Operations,

Head Office operations, New Delhi

Head Office, New Delhi

Head Office Operations, New Delhi

Depots operations

To be decided


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3.


To - Be Business Processes

4.1 Master Data Maintenance AS-IS Business Process

Suggested Business Process

At Kajaria Ceramics, general data is maintained in the existing legacy system for raw materials, stores, spares, power and fuel and packaging materials. And the prices, terms and conditions for vendors are also maintained.

SAP R/3 provides functionality for maintaining the following master data: 1.

Materials

2.

Services

3.

Vendors

4.

Purchasing Info Records

1. Material

5.

Source List

2. Vendor

6.

Vendor Evaluation

3. Purchasing info record (Conditions)

7.

Conditions (Commercial)

Business Requirements Master data is required to maintain uniquely, as per the SAP standard system, for the following:

4. Services Gaps:

5. Vendor evaluation

A

4.1.1 Sub-Process Scope: Maintenance of Material Master AS-IS Business Process Material Master: is maintained in legacy system. Following information is maintained in the system: 1 material description 2.unit of measure 3. Sub-Ledger account description 4. Cost Centre Whenever there is a new material, material code is opened by Stores in the system with above mentioned details.

Suggested Business Process Kajaria Ceramics shall maintain material master data in Standard SAP System. In mySAP ERP the material master contains information on all the materials that a company procures or produces, stores, and sells. It is the company's central source for retrieving material-specific data. This information is stored in individual material master records. The material master is used by all components in the SAP Logistics System. The integration of all material data in a single database object eliminates redundant data storage. In the SAP Logistics System, the data contained in the material master is required, for example, for the following functions:


Page 16 of 73


Materials are grouped into: 1.Raw materials: these are further categorized according to manufacturing operation, viz•

Body

•

Glaze Frits

•

Glaze material others

•

Stains

•

Zirconium

These are further differentiated according to local/ Indigenous and import. 2. Packing materials: include cartoons of various sizes, wooden pallets, and plastic sheets for shrink wrap, glue, ink and strapping rolls.


•

In Purchasing for ordering

•

In Inventory Management for goods movement postings and physical inventory

•

In Invoice Verification for posting invoices

•

In Sales and Distribution for sales order processing

•

In Production Planning and Control for material requirements planning, scheduling, and work scheduling

Material Type Materials with the same basic attributes are grouped together and assigned to a material type. This allows managing different materials in a uniform manner in accordance with your company's requirements. SAP Standard Material types can be used for all the materials. At Kajaria, the material types, used are, •

Raw Materials (ROH)

3. Fuel: include RLNG, HSD, LDO, Furnace oil.

•

Packing Materials (VERP)

4. Finished goods: There are two types of finished goods:

•

Semi finished (HALB)

1. Floor Tiles ( matt)

•

Pipeline (PIPE) - Only in case of Sikanderabad

2. Wall Tiles (glossy)

•

Finished (FERT)

Floor tiles are categorized according to the size like 300 X 300 mm, 400 x 400 mm, 395 x395 mm, etc which is further grouped into series like Plain, printed, budget series, and etc The product in the series is further divided into standard, commercial and utility.

•

Trading Goods (HAWA)

•

Spares (ERSA)

•

Manufacturer Parts (HERS)

•

Operating

Broken tiles are sold separately as scrap.

supplies

(HIBE)–Only

in

case

of

Sikanderabad Plant for screen

5. Trading Goods: Wall and floor tiles, borders and cassette are procured within India and are also imported from china, Italy, Spain, etc for trading.

•

Non-stock Materials (NLAG)

•

Non valuated Materials (UNBW)

Walls and floor tiles meant for trading are classified like finished goods. (See 4.)

•

Service (DIEN)

The material type also decides -


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•

Material master is required to maintain uniquely, for raw materials, packaging materials, semi finished goods, finished goods, spares, trading goods, pipeline materials.

Whether the material number can be assigned internally or externally

•

Which screens appear and in departmental data you may enter.

Requirement to have external number range.

•

What procurement type the material has, that is, whether it is manufactured in-house or procured externally, or both (for Semi-finish)

Business Requirements

Manufacturer Part Number (MPN), which is different from Kajaria’ s material number, to be added while creating PO, for certain trading materials as and when required.

Requirement is to make Fuel as a new material type (statutory requirement)

what

sequence

which

Material master creation includes Material Basic data, Purchasing, MRP, Accounting Views, information like description of the material, base unit of measure, order unit, valuation class, Price control etc. are given while creating the material master. Material coding for all material types will be provided as per the requirement. Material Group Key that you use to group together several materials or services with the same attributes, and to assign them to a particular material group. Material groups are maintained in order to meet the analysis & reporting requirements as well for searching material master records. Material will be grouped according to their characteristics maintained and a 4 digit materials groups provided as required. Material Master (Excise Data) The part of the material master record that contains information relating to Indian excise duty. In conjunction with other data, this data is used to calculate excise duty on various transactions. The excise part of the material master is divided into the following screens: Chapter IDs On this screen, you define the chapter IDs and corresponding descriptions as described in the excise tariff structure. This information is used when you create excise invoices and is also shown in the various excise registers


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Material and Chapter ID Combination On this screen, you maintain the excise data relating to materials. For each material, specify: • Chapter ID • Whether the material can be sent to subcontractors • The material type This denotes, for example, whether the material is a raw material, a capital good this affects the CENVAT process – or if it is a finished good on which excise has been paid, to be covered by the Update of RG 1 and Part I Registers • Whether you accept more than one goods receipt per excise invoice, and if so, whether the excise duty should be credited to the CENVAT account immediately a goods receipt is posted (multiple credit) or not until all the goods receipts have arrived (single credit) This information is valid for a given plant. If the information is valid for all the plants, however, leave the Plant field blank. Material Assessable Value On this screen, you maintain the net dealer price and the assessable value of all materials that you send to subcontractors or for any other issue. These values serve as the excise base value when the materials are issued, and tell the system how much excise duty to reverse from your CENVAT account. CENVAT Determination On this screen, you specify which raw materials are used to produce which finished (or semi finished) goods. The system uses this information to determine whether it you can claim a CENVAT credit for a material. Excise Tax Rate On this screen, you specify for each chapter ID every possible rate Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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of excise duty that might apply, so you must take into consideration each permutation of plant and customer; and each combination of plant and vendor. You can maintain the basic excise rates in the following forms: • Ad valorem • Specific • As a combination of both For each rate, specify until which date it applies. You can also maintain the additional excise duty and special excise duty in ad valorem form, should any apply. If you need to give these rates as a fixed sum, use the Quantity Based AED and SED screen. Additional Excise Rate On this screen, maintain any cess applicable. Exceptional Material Excise Rate On this screen, maintain any exceptions that apply to the excise rates that you have defined. Exceptions can apply to a single material from all vendors, of to a single material from one vendor only. If you have an exceptional rate for a customer–material combination, you can maintain it here as well. Sales Tax Setoff Percentages On this screen, maintain the percentage of local sales tax on inputs that you can deduct against LST on outputs. The setoff amount is deducted from the inventory valuation of the material. Currently very few states, for example, Maharashtra and Gujarat, participate in this scheme. Gaps: A. Material groups for Kajaria will be finalised by the Key Users.


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4.1.2 Sub-Process Scope: Shipping Instructions AS-IS Business Process


Shipping and packaging instruction are mentioned in PO.

Shipping and packaging instructions are set out in purchase orders issued to vendors. When the relevant goods receipts are entered, the extent to which the vendor has complied with these instructions can then be noted.


In PO it will be specified: Which packaging and shipping instructions apply to deliveries of ordered goods Whether the instructions are to be included in the PO document printout Which criteria apply in assessing the degree of the vendor's compliance with the instructions Example: CO coil NE unpacked NT nylon net Gaps: A 4.1.3 Sub-Process Scope: Purchasing Value Keys AS-IS Business Process


At KCL, no purchasing value keys are maintained in the legacy system.

Purchasing value key


The purchasing value key serves as a data entry aid.

A key defining the valid reminder days and tolerance limits applicable to this material for the purchasing department.

In the material master record, you can store rules governing: The issue of reminders and urging letters (expediters) with respect to nearly due and overdue deliveries The admissibility of over- and under deliveries ("overages" and Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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"underage") Order acknowledgment requirements for PO items Shipping/packaging instructions This data appears as default data in purchasing documents and is taken from the material master record (unless a purchasing info record exists, in which case it is taken from the latter source).

Gaps: A 4.1.4 Sub Process Scope: Service Master Maintenance AS-IS Business Process


At Kajaria Ceramics, services are used for General, Engineering, Housekeeping, Security, Forklifts, Maintenance of AC’s, Network and photocopier. Also Kajaria has also got some services on AMC’s with some vendors. No service master is maintained in the legacy system.

Service masters shall be maintained for various Services with Description, Category and Unit of Measure using the ‘Master Data Maintenance’ in ‘External Services management’ of Materials management Module.

TDS and service Tax, vendor/service provider.

works

Tax,

etc

are

charged

by

Business Requirements Services are required as per the SAP standard system, as part of service contracts negotiated with predetermined terms and conditions with approved vendors for performing the services of engineering, production, general, house keeping, network, maintenance of AC’s, security and photocopier. Services shall always be made available through the SAP system to obtain the services with the vendors whenever the requirement comes

Following critical information shall be maintained in the service master record:

1.

Service Number, which gives a unique identification to the service. This shall be internally generated by the system.

2.

Service Category, which describes whether a service is an internal service or a service to be procured externally. In conjunction with the organizational (maintenance) status of the service master, the maintenance views can be controlled i.e. whether a service master can have – a basic data view, controlling view, sales & distribution view. Based on the type of service, the service category shall be maintained.

3.

Description which describes the service in brief

Examples of Services for which Master records shall be created: 1.

Annual Maintenance Contracts

2.

Repairs in KCL premises

3.

Repairs outside


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Gaps: A 4.1.5 Sub Process Scope: Maintenance of Vendor Master AS-IS Business Process


At Kajaria Ceramics, the vendor master is maintained in the legacy system like their names, addresses, telephone numbers, CST/LST NO, PAN NO. Payment terms and terms and conditions. But the complete information is not maintained.

Vendor Master Data shall be maintained at the following levels:

Vendor Master is maintained in legacy system separately for each manufacturing plant. Following information is maintained in the system:

1.

Address details, telephone, Fax, CST, and LST no.

2.

credit days

•

General data

•

Company Code Data

•

Purchase Organisation Data

General Data: The general data includes such information as the vendor's address and telephone number, the language of communication with the vendor, email address, etc. Company Code Data:

2.unit of measure

Accounting information shall be maintained at company code level. This data includes, for example, payment transaction data and the number of the relevant control account. Only one control account can be assigned to each vendor. And we can maintain vendor customer relation and vendor bank details in vendor master.

3. Sub-Ledger account description

Purchase Organisation Data:

4. Cost Centre

Purchasing data like contact persons, terms of delivery, etc. shall be maintained at purchasing organization level. Vendor’s excise details can be maintained using the CIN functionality of R/3.

Material Master: is maintained in legacy system. Following information is maintained in the system: 1 material description,

Business Requirements Unique vendor master data is required to maintain for each vendor, by giving account numbers, as per SAP standard system. The vendor master data shall be integrated in the system and should be accessed during procurement of materials and the liabilities, for each vendor, to be accounted automatically as and when a transactions takes place The payment status shall be tracked through the system online, vendor-wise and total vendors

Vendor Schema Group The schema group mentioned in the vendor master is useful in determination of pricing procedures. Vendor Account Group: Vendor account Group mentioned in the vendor master is useful to group the vendor e.g.: 1. Domestic Vendors 2. Import Vendors 3. Service vendors


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4. Employee vendors Terms Of Payment Details of Terms of payments has to be provided by KCL Terms of payment could be used on different options available in the SAP standard system. Vendor Master (Excise Data) The part of the vendor master record that contains information relating to excise duty. In conjunction with other data, this data is used to calculate excise duty on various transactions. The excise part of the vendor master is divided into the following screens: Vendor Excise Details On this screen, you enter your vendors' tax numbers, which are used for various forms of correspondence and reports: • Excise registration number (and the range, division, and collector ate in which this is located) • Central sales tax (CST) number • Local sales tax (LST) registration number • Permanent account number (PAN) In order for the system to be able to calculate which rate of excise duty to apply on purchases from the vendor, you must also: • Assign it a vendor excise duty status • Specify what type the vendor is, for example, a manufacturer, first-stage dealer, or importer for 57AE returns • If the vendor qualifies as a small-scale industry(SSI), you must also specify: − What its SSI status is (which you must first have defined under SSI rates, − Whether or not it is participating in the CENVAT scheme SSI Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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Rates On this screen, you define the excise rates that apply to purchases from vendors that qualify as SSIs. You define one status for each band (or "slab") of sales volume provided for by the law, and for each SSI status, the rates of excise duty that applies to that slab under the two schemes Excise Indicator for Plant and Vendor On this screen, you define the final excise duty indicator Gaps: A: 4.1.6 Purchase Info Records


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AS-IS Business Process


At Kajaria Ceramics, no purchasing info record is maintained in the legacy system.

Purchasing Info records shall store vendor - material details for various types of procurement like standard and sub-contracting.

Business Requirements Kajaria Ceramics shall be required to maintain applicable condition records, for desired vendors, for arriving effective prices, while making purchase orders, as per the SAP standard system

These details shall be maintained for a Plant and Purchasing Organization. Details like Prices & other conditions, under and over delivery tolerances, are stored in these records. The information in the latest purchasing info record for a combination of vendor and material for that purchasing organization and plant shall always be defaulted when creating a Purchase Order. Purchasing info records shall be created manually or automatically. Manual Creation shall be done when a purchasing info record doesn’t exist already for a vendor – material combination for a purchasing organization and plant. Manual Update can be done when there are changes in the values of the Purchasing Info Records Automatic updation/creation is also possible at the time of creation of Quotation, Purchase Order or Contract for those records that already exist. Purchasing Info Records for multiple validity periods can be maintained at the same time. Gaps: A

4.1.7 Source List Maintenance AS-IS Business Process


At Kajaria Ceramics, no standard source lists is maintained in the legacy system.

The source list shall be used to maintain the possible sources of supply of material for a given period or to block a possible source of supply for a specific period or to completely block the external procurement of a material.

Business Requirements Shall be maintained as per SAP standard system

A Source List shall be created automatically or manually. 1.

Automatic creation of a record in the source list for a particular material is done when a purchasing info record is created. Source list shall also be automatically created when


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an outline agreement is created. 2.

Manual maintenance shall be done when a new source / new material is identified.

Gaps: A 4.1.8 Maintain Vendor Evaluation Criteria AS-IS Business Process


At Kajaria Ceramics, vendor evaluation assessment is carried, manually, once in a year, to carry out the total performance results of each vendor with respect to delivery on time, competitive price, satisfied quality and committed service. This is also calculated based on no of rejections and delayed deliveries and services

Vendor evaluation is to be done to analyze and assess the performance of external suppliers of materials & services

Business Requirements Vendor evaluation criteria is required, for desired vendors, as per the SAP standard system to facilitate and give scoring system for individual vendors

Vendors shall be awarded scores for a number of different criteria. Vendor’s overall scores shall be used to determine whether they are retained in or eliminated from Kajaria’s vendor base. Vendor evaluation shall be done on the basis of the following main criteria: Price Quality Delivery and Service. Under the main criterion, again further sub-criterion can be defined like Price level, Price History, Goods Receipt, Quality Audit, Complaints / Rejection level, On-time delivery performance, Quantity reliability, Compliance with shipping instructions, Confirmation Date etc. KCL shall define a scoring range i.e. a common scale on which the vendors can be rated. The scale shall be between 1-100 points. For every main criteria, a weightage can be assigned The overall score shall be calculated from the scores of the main criteria taking the weighing factors for each main criterion into account. All the values shall be decided at the time of configuration. Gaps: A


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4.1.9 Sub-Process Scope: Maintenance of Conditions for Procuring Materials 4.1.9.1 Prices AS-IS Business Process


The pricing structure is maintained manually, at Kajaria, based on each vendor’s terms and conditions which include Gross Price, VAT, Education CESS, CENVAT, MODVAT, taxes, service tax, discounts, service charges , work tax, etc and this is being used in the purchase orders for procuring the materials

This component enables you to store pricing stipulations agreed with the vendor (such as applicable discounts or surcharges, or stipulations regarding the payment of freight costs) in the system. You can enter these conditions in quotations, outline purchase agreements, and info records. You also have the option of entering general conditions at vendor level, for example. The system then applies the conditions in determining the price in purchase orders (POs). You can enter further conditions in the PO itself

Business Requirements The pricing is required to be calculated and maintained for each vendor, in order to generate effective price while creating a purchase order, as per the SAP standard system which can be calculated on Gross Price for VAT, Education CESS, taxes, discounts, service charges, as per legal requirements.

Prices shall be of three types – (a) Gross Price which is exclusive of Discounts or surcharges, (b) Net Price inclusive of surcharges, discounts, taxes, (c) Effective Price which includes the Net Price but taking delivery costs, cash discount and other incidental costs. Pricing conditions shall be maintained in the purchasing info records or in the header or item level as applicable at the time of PO creation. Gaps: A

4.1.9.2 Discounts AS-IS Business Process


At Kajaria Ceramics, the discounts are maintained in the legacy system for applicable vendors along with vendor information data, terms and conditions.

The Discount condition records shall be maintained with conditions and values associated with conditions. While processing a transaction, the system will search for valid record and as soon as it finds the record matching the condition of sale it should return a discount value. Some of the discounts can be maintained at the

Qty discounts, Qty Scale discounts both on percentage basis as well as on value basis are offered by vendors. Like in the case of


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Propane purchase.

time of preparing the purchasing document.

End of the period rebate on purchases are also given by vendors.

Gaps:

These discounts shall be used in the purchase orders during procurement process.

A


4.1.9.3 Excise & Import Duty AS-IS Business Process


At Kajaria Ceramics, the applicable excise duty with each vendor, is currently maintained in legacy system to use in the purchase order document while procuring the materials

This shall include the exceptional rates that may be applicable for certain vendors and material combination. The setoff of excise duty or inventorying of excise duty will be controlled by Tax codes. Vendor, Material and other factors that determine the excise duty shall be maintained through the CIN Module of SAP R/3.


In Imports the CVD, which needs to be captured for CENVAT postings, shall also be incorporated.

Shall be maintained as per SAP standard system

Gaps: A 4.1.9.4 Sales Tax / VAT AS-IS Business Process


At Kajaria Ceramics, applicable sales tax and VAT is used, in the purchase order documents against each vendor

Tax condition records can be maintained in the system for various levels of taxes, like central and state level, which will be automatically determined during a transaction depending upon the receiving plant and the vendor’s locations.


The tax values are maintained as percentages with the help of tax codes. Various sales tax codes are to be maintained in FICO Module of SAP R/3. 4.1.9.5 Octroi


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At Kajaria Ceramics, no Octroi is paid. Business Requirements

Gaps:

Nil

A 4.1.9.6 Freight



At Kajaria Ceramics, freight is being used as and when applicable with respective vendors and it’s been given in the purchase order.

Freight is to be maintained as a condition type.

Freight charges are borne by Kajaria Ceramics and /or by the vendor as per the terms and conditions agreed in PO. •

Freight charges are paid directly to the supplier.

•

Freight charges are paid to the goods carrier at the time of GR.

•

KCL has hired the services of Goods carrier/Transporters in the form of an agreement to transport the goods from vendor to the plant on the behalf of KCL.

The Planned Freight costs shall be booked in the same Purchase Order for which the procurement is to be done. In cases where the material carrying party is different from the one on whom the PO is raised the Freight Vendor shall also be maintained in the same PO. For uncertain freights, approximate/minimal freight shall be entered in the PO, for the internal system purpose and final PO for vendor shall be sent without mentioning the freight. And when the actual freight comes to be known, during invoice entry, the correct freight amount can be entered. The freight invoice will be booked as soon as the material is received in the stores and the value will be updated in the stocks. Gaps: A

Business Requirements Shall be maintained as per SAP standard system.

4.1.10 Payment Terms AS-IS Business Process


At Kajaria Ceramics, payment terms are maintained manually for each vendor, based on the predetermined negotiations and terms & conditions.

Kajaria Ceramics shall use the standard payment terms wherever possible. Wherever required, specific payment terms shall be defined in the system like Payment with LC.

Following Payment terms are used: 1.Advance against Purchase 2.100% payment against delivery

Payment terms could feasibly be carried out for each vendor as per the agreed negotiations like 30 days, 45 days, payment against delivery, etc, etc The payment shall be blocked under deviation of material quality.


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3. Partly advance, balance against delivery 4. partly advance+ partly against delivery,+ partly against certain credit days and remaining after retention period


The total quantity shall be received, but the entire payment can not be released based on the deviation of quality parameters.

5. Payment after certain credit days.

Gaps: A

Percentage in payment terms varies from vendors to vendor and material to material.

The payment shall be blocked under deviation of material quality. The total quantity shall be received, but the entire payment can not be released based on the deviation of quality parameters.

Business Requirements Shall be maintained as per SAP standard system. The system should be able to allow LC payment for local and import vendors.

4.2 MRP (Material Requirement Planning)


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This is covered in PP module

MRP: - The main function of MRP (Material Requirements Planning) is to ensure material availability at right time and in right quantity. It is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. This process involves the monitoring of stocks and, in particular, the automatic creation of procurement proposals for purchasing and production based on the requirements against the available stocks.

Business Requirements The requirement is covered in PP module

You must first create the master data to be able to work with the MRP component. To do this, you require the following components:

•

Material Master

•

Bills of Material

The MRP is covered in PP module Gaps: A

4.3 Procurement Process AS-IS Business Process


At Kajaria Ceramics, procurement is categorised into •

Local Purchase

External procurement in the MM System centers around a general cycle of activities.

•

Import Purchase

Process Flow

•

Service Purchase

The typical procurement cycle for a service or material consists of the following phases:

The purchase department at New Delhi, Sikanderabad and Gailpur, prepares purchase requisitions, Request for quotations, Contracts, Scheduling Agreement and purchase orders. The purchases at depots and showrooms are through Head Office. Once, the vendor is finalised, then the purchase orders is prepared and it is approved by Purchase Committee comprising of User Dept’s Head, Purchase Dept’s Head, Plant Head, Account’s Head, GMD and CMD.

•

Determination of Requirements Materials requirements are identified either in the user departments or via materials planning and control. (This can cover both MRP proper and the demand-based approach to inventory control. The regular checking of stock levels of materials defined by master records, use of the order-point method, and forecasting on the basis of past usage are important aspects of the latter) You can enter purchase


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Against the PO, the materials will be supplied by the vendor and GR will be prepared against vendor’s delivery challan /invoice, after inspection of the materials as per the inspection criteria / parameters given for the raw material and packaging materials and then it is finally sent to the stores department. Any materials being found defect or rejected, it’s then sent back to the vendor with return note and gate pass Based on the GR and inspection reports, the invoice of the vendor, will be processed by purchasing dept and forwarded to the finance dept for the payment release


requisitions manually, or they can be generated automatically by the materials planning and control system. •

•

The approval process shall be applicable for Purchase Requisitions, Request for Quotations, Purchase Orders and Contracts, on document type basis. The approvers shall include User Deptt Head, Purchase Deptt Head, Plant Head, Account ‘s Deptt Head, GMD and CMD. It is based on the PO value. The purchasing order documents shall be converted in to word/text format, so as to facilitate for sending them to vendors, through e-mail. Purchasing groups that are defined for Head Office should be

Vendor Selection and Comparison of Quotations The system is capable of simulating pricing scenarios, allowing you to compare a number of different quotations. Rejection letters can be sent.

•

Purchase Order Processing The Purchasing system adopts information from the requisition and the quotation to help you create a purchase order. As with purchase requisitions, you can generate Pos yourself or have the system generate them automatically. Vendor scheduling agreements and contracts (in the SAP System, types of longer-term purchase agreement) are also supported.

The Purchase requisition should be the basis for starting the procurement process

During the purchase order creation, for the given materials with respective vendors, the predefined prices, conditions and payment terms should be taken automatically, from the master data that are maintained in the SAP system

Source Determination The Purchasing component helps you identify potential sources of supply based on past orders and existing longerterm purchase agreements.

The procurement process shall be managed as per SAP standard system.

The Request for quotation shall be processed based on purchase requisition approval only and the RFQs shall be obtained from several vendors and the rates and conditions shall be entered in the system in order to prepare a comparison statement on a mean / minimum criteria


•

Purchase Order Follow-Up The system checks the reminder periods you have specified and - if necessary - automatically prints reminders or expediters at the predefined intervals. It also provides you with an up-to-date status of all purchase requisitions, quotations, and purchase orders.

•

Goods Receipt and Inventory Management Goods Receiving personnel can confirm the receipt of goods simply by entering the Po number. By specifying permissible tolerances, buyers can limit over- and under deliveries of ordered goods.

•

Invoice Verification The system supports the checking and matching of invoices. The accounts payable clerk is notified of quantity and price variances because the system has access to PO and goods receipt data. This speeds the process of auditing and clearing


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flexible while placing orders for Sikanderabad, Gailpur, depots and showrooms. Either of the groups shall be used through either locations


invoices for payment. Procurement for Consumption

Stock

Versus

Procurement

for

Direct

In the MM System, you procure either for stock or for direct consumption. You can determine the purpose for which ordered materials are being procured in the purchase order, for example. This section describes the differences between procuring for stock and procuring for direct consumption in the MM System. Procurement for Stock A stock material is a material that is kept in stock. Such materials are placed in storage following a goods receipt. When goods are received by or issued from stores or the warehouse, the stock on hand is increased or reduced by the amount of the quantity received or issued. When you order a material for stock, the system does not require an account assignment. This is because the posting to the appropriate stock and consumption accounts occurs automatically after each goods movement (for example, after a material is received by the stores or issued from stores) . Furthermore, the value and the quantity of the stocked material are updated in the material master record. To order a material for stock, the material must have a master record Procurement for Direct Consumption When you procure for direct consumption, you specify the consumption purpose by entering an account assignment (for example, a cost center) . On goods receipt, the material or service counts as having been consumed. If a material is procured for direct consumption, the consumption accounts in Financial Accounting are posted when the goods receipt is entered. The total quantity and value of existing stocks of the material are not affected. Material Account Assignment Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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For each item of a purchasing document, you specify whether procurement is for stock or for direct consumption. In a purchasing document, you can enter items with or without account assignments. If you order stock materials, the ordered material must have a material master record. If you order consumable materials, the ordered material may have a material master record. Account assignments are possible for the following purchasing documents: •

Purchase requisitions

•

Purchase orders

•

Outline agreements

The Procurement process has various stages like Purchase Requisition, Request for Quotation, Quotation, Purchase Order, Contract, Goods Receipt with RG23 Postings and Invoice Verification Purchase requisition can be created for a given plant storage location, purchase organisation, material code and delivery date. Request for Quotation, can be created by giving the material code, Plant, Storage location, purchase organisation, quotation deadline and requirement date. Vendor prices can be maintained and price comparison can be made. Gaps: The purchase order documents that need to be converted into word/text format in order to send them to vendors through e-mail, shall be considered during the ABAP enhancement.

4.3.1 Sub-Process Scope: Purchase Requisition


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At Kajaria Ceramics, any material is required, it’s generated through purchase requisition and approved by the individual dept head and forwarded to the purchase dept for the procurement.

A purchase requisition is a request or instruction to Purchasing to procure a certain quantity of a material or a service so that it is available at a certain point in time.

Materials requirements are identified either in the user departments or via the demand-based approach to inventory control.

Purchase requisition contains item category, account assignment category, material group, quantity and delivery date of the material to be supplied or the service to be performed.

The regular checking of stock levels of materials defined by master records, use of the order-point method, and forecasting on the basis of past usage are important aspects for identifying the material requirement for purchase.

Purchase Requisitions are created under the following situations:

Minimum and maximum level of stock is maintained in stores. When the material falls below minimum level, a Purchase Requisition/Indent is created by stores. The stock is monitored on daily basis by taking the report from legacy system.

a.

Purchase Requisitions shall be created - automatically on MRP Run or manually by the requesting department.

b.

Purchase requisition shall be created manually as well as automatically by the plant maintenance.

In case of plan for more production, production department creates indent for raw materials. Business Requirements The purchase requisition shall be created through SAP standard system. A purchase requisition can be created manually as well as automatically through MRP run. The business requirement is to have a different number range for PREQ’S for both the plants for differentiating and identifying purpose on plant basis. The purchase requisition should be created for services and materials requirements

4.3.2 Sub-Process Scope: Approval of Purchase Requisition Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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At Kajaria Ceramics, there is PREQ approval process the purchase requisition after approval from Plant head/ JMD is forwarded to Purchase Dept.

Release Strategy shall be incorporated for release of Purchase Requisition as per the requirements.

Only in the case of capital goods and high value items PREQ is sent for approval to JMD and/or CMD then only the purchase requisition is ready for further process.

The release is applicable for only manually generated Purchase Requisitions

Gaps:

Business Requirements The purchase requisition should undergo the approval process as per the SAP system for all the purchase.

A

4.3.3 Sub-Process Scope: Request for Quotation Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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In case of any new material or services or in some cases for existing material/services being requisitioned, multiple enquiries are floated by the purchase dept with concerned suppliers for quotation. Request to suppliers is send either by Fax, E-mail, Verbal/Phone to submit price quotation for the specified quantity, terms & conditions, delivery schedule for the materials & services.

A request for quotation (RFQ) is an invitation extended to a vendor by a purchasing organization to submit a quotation (bid) for the supply of materials or performance of services. An RFQ consists of the RFQ header and the items.

•

Contains general information on the RFQ, such as the vendor’s address

•


The RFQ shall contain the total quantity required, name & address of the vendor, valid date and the predefined terms and conditions.

Items Contain the total quantities and delivery dates for the materials or services specified in the RFQ.

Request for quotations shall be created through SAP standard system, with reference to approved purchase requisitions or in general. Different RFQs shall be prepared through SAP standard system and send to various vendors for the quotations

RFQ header

You use this component if you wish to manage and compare requests for quotation (RFQs) issued to vendors and the quotations submitted by the latter in response to them. Gaps: A

4.3.4 Sub-Process Scope: Quotation AS-IS Business Process


At Kajaria Ceramics, upon receipt of quotes from various suppliers, a comparative statement is prepared in excel, based on the conditions like price, taxes, duties, Freight, discount, credit days, timely delivery, reliability, service , etc . Total cost to the company is calculated and then evaluation is carried out for the best option to find a right vendor for procurement of materials.

A quotation is an offer by a vendor to a purchasing organization regarding the supply of materials or performance of services subject to specified conditions.

Depending on the value the Quotation undergoes the approval process and then Quotation is finalization. The most suitable quote is finalised for further process.

The RFQ and the quotation form is a single document. Prices and conditions quoted by vendors are entered in the original RFQ. If you have issued an RFQ to several vendors, you can have the system determine the most favourable quotation submitted and automatically generate letters of rejection to the unsuccessful bidders. You can also store the prices and terms of delivery from certain quotations in an info record for future accessing. A quotation is legally binding on the vendor for a certain period. The quotation is the vendor’s response to a request for quotation


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Business Requirements: The comparison statement or list shall be generated through SAP standard system. The price comparison list can be prepared based on either average or minimum value of all the obtained quotations for various vendors by providing collective number. The RFQ’S should undergo the approval process as per the SAP system for all the purchase.


issued by a purchasing organization. A quotation consists of items in which the total quantity and delivery date of an offered material or service are specified. An item of a quotation may contain a delivery schedule made up of a number of schedule lines in which the total quantity is broken down into smaller quantities to be delivered on the specified dates over a certain period. An item of the procurement type External service contains a set of service specifications. The latter can be hierarchically structured. The summary view of such a hierarchical structure is referred to as an outline. The outline comprises a number of levels, each representing a level of the service hierarchy. The quantities of the quotation are set out in service lines, representing individual jobs or activities You can compare the prices from all quotations received as a result of a competitive bidding process using the price comparison list . The comparison list ranks the quotations by item from lowest to highest price. Prerequisites Before you generate the price comparison list, you need to consider the following: If possible, each quotation should have pricing data for the same item. Only then is the correct interpretation of the mean and total values possible. If quotations 1 and 2 have pricing data for item 1, but quotation 3 only has price information for item 2, then the system does not have enough information to accurately compare the prices of all three quotations. If a quotation is submitted in a foreign currency, the price is automatically translated into the currency of the company code, which is determined by your purchasing organization. You should therefore make certain that up-to-date exchange rates are defined in your system. Reference quotation


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You can compare the quotations within the list with a sample quotation. The system displays the percentage deviation between each quotation in the list and the sample quotation. Mean/minimum value quotation The price comparison list can also display a "fictitious" quotation reflecting the average or minimum value of all quotations. Select either the Mean or Minimum value quotation field to choose the type of fictitious quotation. Percentage basis The price comparison list displays the percentage of each item in relation to the maximum, minimum, or average price. To determine the display type, enter one of the following: –

“+” Highest value for each item is the 100% value

–

“-“ Lowest value for each item is the 100% value

–

+"_" Mean value for each item is the 100% value

Price Computations Select the appropriate field to specify which of the following should be taken into account in determining the comparison price: –

Cash discount

–

Delivery costs

–

Effective price

Gaps: A The existing RPO document will not be brought into SAP system. The Purchase Order document will be used as direct document.

4.3.5 Sub-Process Scope: Purchase Order Creation AS-IS Business Process



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At Kajaria Ceramics, purchase orders are prepared for materials and services with reference to purchase requisitions Purchase orders are prepared some times for imported raw materials as and when they find attractive pricing terms vendors and it’s been negotiated by head office for pricing terms and conditions and the plant shall then place orders based on the production requirements. Also sends some materials for job work through purchase orders to sub-contractors for making final product. The sub-contractor shall perform his services and return the final products back to Kajaria. Thus the sub-contractor is liable for his service charges only.

Business Requirements The purchase order shall be created as per SAP standard system and every PO must have purchase requisition reference. The payment and delivery terms and conditions, which are fed in the master data, should be accessible while creating purchase order Import PO should display figures in foreign currency, while indigenous PO should display in INR. The history of PO should be available in the system

Shipping notification is required for import goods.


A purchase order is a formal request or instruction from a purchasing organization to a vendor or a plant to supply or provide a certain quantity of goods or services at or by a certain point in time. A purchase order (PO) consists of a document header and a number of items. The information shown in the header relates to the entire PO. For example, the terms of payment and the delivery terms are defined in the header. A procurement type is defined for each of the document items. The following procurement types exist: •

Standard

•

Subcontracting

•

Stock transfer

•

External service

Delivery of the total quantity of material (or performance of the total volume of services) specified in a purchase order item can be spread over a certain period in a delivery schedule, consisting of lines indicating the individual quantities with their corresponding planned delivery dates. For PO items to be supplied by subcontractors, you can specify the necessary input materials or components that are to be provided to the subcontractor for assembly or processing in respect of each delivery date stipulated. An item of the procurement type "external service" contains a set of service specifications. The latter can be hierarchically structured. The summary view of such a hierarchical structure is referred to as an outline. The outline comprises a number of levels, each representing a level of the service hierarchy. The order quantities are set out in service lines, representing individual jobs or activities. Value limits are specified instead of service lines for services or work that initially cannot be specified precisely. If services covered by an already existing contract are released (ordered, or called off against the contract), the PO item can


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contain a value limit relating to the contract in question. Conditions Conditions can apply at various levels: •

To the entire purchase order

•

At item level, to the material to be supplied or to the set of service specifications in the case of services

•

At service line level for individual services (tasks or activities)

Account Assignment Costs can be apportioned among various Controlling objects via the account assignment. Vendor Confirmations Vendors can issue confirmations to the relevant purchasing organization indicating their compliance or non-compliance with scheduled delivery dates. PO History The transactions following on from a purchase order documented in the PO history on an item-specific basis.

are

Partner Roles Instead of the vendor as the order recipient, other business partners can appear in various partner roles (e.g. goods supplier or invoicing party). Plant In the purchase order, each item is destined for a certain plant. Each plant belongs to a company code, to which the vendor’s (creditor’s) invoice is directed. Texts You can enter text in a purchase order directly or change texts that are suggested by the system. There are two kinds of text: •

Header text: applies to the entire document

•

Item text: applies only to the relevant item


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You define which texts appear in which order on printouts in Customizing for Purchasing. You can enter several header or item texts, which you can identify by your own codes.

Types of Purchase Orders Purchase Order Types are classified as •

Standard PO

•

Imports PO

•

Service Orders

•

Stock Transport Orders

•

Sub-contractor purchase order

These Purchase Documents will have separate numbering series. Standard PO will cover the domestic procurement need of raw & packing materials, consumables, capital items etc. Consumables/Capital items are account assigned to a respective Cost Centre & G/L account. Imports PO will be used for procurement from foreign countries. Pricing conditions will be maintained based on CVD / Customs Duty and tax conditions which are separate condition types. Service Purchase Orders are created for the external procurement of services from a vendor. These services can be account assigned to a Cost center & G/L account. Stock transport orders are used in case of stock transfer from one plant to another. At the time of Purchase Order creation, system will capture from various masters e.g. purchasing info record, vendor master etc.. which can be changed subsequently. Change history of Purchase order is available at header as well as item level. GAPS:A The system shall be able to get the prices from the purchasing info Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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record during PO creation. Stocks and accounting documents to be updated for import goods against purchase orders, prior to their physical arrival to the factory, in order to make payments to the vendor and/or freight collectors. 4.3.6 Sub-Process Scope: Purchase Order Approval AS-IS Business Process


At Kajaria Ceramics, the approval process is currently undertaken for Purchase orders. The approval of the Purchase Order is based on the value of PO which is approved by the Purchase Committee.

The Release strategy shall be applicable for purchase orders. The various levels identified for each document will be controlled by authorizations.

1.The purchase at plant level is limited up to the value of Rs25000, which is approved by user dept Head, Purchase Dept Head, Plant Head and Account’s Head 2. For PO value above Rs25000/- up to Rs 5 Lacs is approved by user dept Head, Purchase Dept Head, Plant Head and Account’s Head and GMD.

Gaps: A There will be no RPO and the PO will be directly approved in the SAP system

3. For PO value above Rs5 Lacs is approved by user dept Head, Purchase Dept Head, Plant Head and Account’s Head and GMD and CMD.

Business Requirements Purchase order document shall be replaced with RPO document and processed as per the SAP standard system. The purchasing document shall be authorised by GM (Production) and/or GM (Maintenance), GM (Commercial & Logistics) and by the Managing Director The approval process for the purchase order shall be routed through SAP standards. 4.3.7 Sub-Process Scope: Purchase Order Follow Up


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At Kajaria Ceramics, after faxing/mailing of purchase orders to respective supplier, is followed up manually via telephone, emailing and faxing methods to ensure for the timely delivery.

The system checks the reminder periods you have specified and if necessary - automatically prints reminders or expediters at the predefined intervals. It also provides you with an up-to-date status of all purchase requisitions, quotations, and purchase orders

Business Requirements Follow up of purchase orders with respective vendors should be routed through the SAP standard system

Gaps: A

All the reminders and confirmation on PO receipt and delivery confirmations with respect to specified dates and locations, should be routed through SAP standard system Required in the case of imports 4.3.8 Sub-Process Scope: Imports AS-IS Business Process 1.

PO is created and sends to the import vendor.

2.

Vendor sends the Performa Invoice.

3.

Incoterms are decided at the time of Performa Invoice. Incoterms used in KCL are: •

FOB

•

CIF

•

Ex-Works

Suggested Business Process The countervailing duty (CVD) on imports is levied in place of excise duty. Unlike other forms of customs duties, such as basic customs duty or special customs duty, CVD paid on imports is credited to CENVAT account. Vendor Master Record for Customs Office The customs office will be created as a Vendor in vendor master record, so that you can create liabilities for the CVD

4.

KCL will decide the manner of payment like LC, or DA, or DP

Condition Type for CVD

5.

Insurance cover note is obtained by KCL, it is an open cover note.

The system handles CVD using a condition type for planned delivery costs.

6.

Dispatch schedule is send by the oversee seller.

7.

KCL decides the manner of dispatch like sea or air.

8.

KCL will decide the shipping lines/route or airline.

9.

KCL tracks the dispatch

CVD Clearing Account When CVD is posted to a CENVAT account the system debits the CVD to the BED account and credits it to a CVD clearing account


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10. When

the goods have arrived at the port, KCL files the papers to custom deptt.

1.

11. Custom Clearance is done.

2.

The vendor ships the goods. When the goods arrive in India, they go through customs. The customs officers issue a bill of entry for the goods, which is in effect an invoice for the CVD on the goods. Once custom office has inspected the goods, they send them on to KCL.

3.

The goods arrive at Gailpur plant, together with the bill of entry. In order to record the bill of entry in the system:

Import Documentation Commercial Invoice

•

Packing List

•

Certificate of origin

•

Bangkok Agreement

•

Bill of Lading/Copy of AWB

•

Insurance cover note

LC- 90, 120, 150, 180, 360, 365 days DA -90, 120, 150, 180 (document against acceptance) DP- document against payment

A purchase order is created for the required goods and is sent to the vendor. For each material that CVD has to be paid when it comes through customs, the CVD will be entered as a pricing condition.

12. Then the goods are transported to different plants/ warehouses.

•


a.

enter an invoice for the bill of entry

In Accounts Payable (FI-AP), the system creates a new vendor item for the CVD at the customs office. The item is offset to the CVD clearing account. b. captures an excise invoice for the bill of entry 4. The stores posts the goods receipt. 5. The stores post the excise invoice.

Type of Licenses •

EPCG- Export Promotion capital goods

•

Duty exemption schemes/ Remission schemes

6. The stores enters the vendor invoice for the materials, following the standard procedure.

Goods under advance license and EPCG no CVD is required to be paid. All CVD paid is modvatable. Raw materials Pigments Frits Punches

"Incoterms" are international rules for the interpretation of the most commonly used terms of foreign trade.


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Roller Ceramic

In particular, the Incoterms regulate the division of costs, and

Packaging Material –shrink-wrap

the transfer of risks.

CMC- carbolic, raw material

Standard settings

Screen printing phosphate)

material-

Zirconium,

STP

(sodium

triple

The standard SAP R/3 system includes the following Incoterms: •

CFR - Cost and Freight

•

CIF - Cost, Insurance and Freight

•

CIP - Carriage and Insurance Paid To

•

CPT - Carriage Paid To

•

DAF - Delivered At Frontier

•

DDP - Delivered Duty Paid

•

DDU - Delivered Duty Unpaid

•

DEQ - Delivered Ex Quay (Duty Paid)

•

DES - Delivered Ex Ship

Calculation:

•

EXW - Ex Works

Basic Duty

•

FAS - Free Alongside Ship

CVD

•

FCA - Free Carrier

Edu. Cess on CVD

•

FOB - Free On Board

Duty Paid Goods Capital Goods equipment.

and

spares, furniture like

tile display,

lab

Traded Goods- Vitrified Tiles, ceramic tiles, furniture, porcelain

SAD- special additional manufacturing goods.

duty

is

also

modvit

able

on

Edu. Cess on Basic Duty+ CVD+ Edu. CESS

Gaps:

SAD on 4% on CIF value of goods + All duties

A,C GAP C: All the documentation required will be considered in the Import documentation add on component, to be discussed separately.


4.3.9 Sub-Process Scope: Contracts AS-IS Business Process


Contracts are made on yearly bases as in the case of raw materials, packaging material, spares, advertisement agencies, etc where delivery schedules details are spelled for whole year. Contracts are also made at the time of new upcoming Projects.

The procurement of the agreed material is done by raising the PO as per contract terms and conditions. A form of outline purchase agreement under which materials are procured on predetermined dates within a certain time period for a


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There are contracts for machinery, all type of services like security, office maintenance, DG Sets, EDP, etc. The contract details are covered in PO.


certain Quantity or Value of contract. Gaps: F

Business Requirements Contract will be routed through the SAP standard system. Contracts will be subject to Approval process.

4.3.10 Sub-Process Scope: Scheduling Agreement AS-IS Business Process


The functionality of scheduling agreement in SAP is not currently used in KCL. If the same material is required over a certain period of time one PO is created where the requirement is split in discrete required delivery dates. Business Requirements Scheduling Agreement will be routed through the SAP standard system and will be subject to Approval process.

If the same material is required over a certain period of time one PO is created where the requirement is split in discrete required delivery dates. A scheduling agreement is a longer term arrangement with a vendor covering the supply of materials subject to predetermined conditions. The conditions are valid for a predefined period and a predefined total purchase quantity. The delivery schedule is given to the vendor to get the material against the scheduling agreement. Working with Scheduling Agreement will shorten the purchase processing time. One delivery schedule can replace a large no of discrete PO. Procurement via scheduling agreements will enable Purchase Dept to reduce the volume of documents used. Gaps: A

4.3.11 Sub-Process Scope: Unit Of Measure AS-IS Business Process


KCL uses following unit of measurement:

In KCL, individual departments may have their own units of measure. For example, Purchasing may use a different unit than Sales. All units of measure other than the base unit of measure are referred to as alternative units of measure. As per the requirement, alternative unit of measure will be maintained. All

MT Kg


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Numbers


quantities that are entered in units other than the base unit of measure are converted to the base unit by the system automatically. If KCL uses units that are not contained in the standard table, KCL will state the factor for converting the alternative unit of measure to the base unit of measure in the material master record.

Litres Kilolitres Metre SCM- Standard Cubic Metre

Base unit of measure: This is the unit of measure in which the stocks of a material are managed. The system converts all quantities entered in other units to the base unit of measure.

MMBTU- Million BTU ( British Thermal Unit) Boxes Pieces Business Requirements The unit of measure will be maintained in SAP along with alternative unit of measure.

Order unit: Allows a material to be ordered in a unit differing from the base unit of measure. The order unit is proposed automatically in purchasing functions, where it can be changed. Sales unit: Allows a material to be sold in a unit differing from the base unit of measure. The sales unit is proposed automatically in the sales order, where it can be changed. Unit of issue: Unit of measure in which the material is issued from the stores. It allows consumption, stock transfers, transfer postings, and physical inventories to be recorded in a unit differing from the base unit of measure and from the stock keeping unit. Gaps: A

4.4 Gate Pass for Entry & Exit of Goods AS-IS Business Process


At Kajaria Ceramics, gate entry is a must for any sort of incoming materials into KCL premises. A register is maintained manually at the security gate for making entry on the movements.

Gate entry system is not part of SAP

The materials that are leaving the premises are also maintained in the register. The material that will be again returned back, RPG- returnable gate pass is prepared and the one that will not be coming back Gate pass will be prepared. Business Requirements

Outbound delivery shall be used for exit of goods Gaps: C Gate entry details cannot be captured at the time of Goods Receipts. New ABAP Development

Gate Entry to be made compulsory for each & every item coming Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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in or going out of the factory premises.

4.5

Goods Receipt of Incoming Materials



At Kajaria Ceramics, on arrival of goods in the factory, the security department intimates to Stores/ Purchase dept. The Stores / Purchase dept confirms whether the goods are to be unloaded or not. The goods that are meant for weighing will be sent to in house weighing station.

The receipt of goods from an external vendor or from production. A goods receipt leads to an increase in warehouse stock. System distinguishes between the following types of goods receipts:

The goods are received and inspected and the MRN is prepared for the actual received goods. If anything found rejected, the same shall be sent back to vendor with intimation note.

1.

Goods receipts with reference to a reservation

2.

Goods receipts with reference to an order

3.

Goods receipt w.r.t. a purchase order

4.

Other goods receipts

The first two types of Goods receipt are covered in PP module. Business Requirements The goods receipt process shall be followed as per SAP standard system. On arrival of materials, the MRN will first be made against the purchase order with respect to storage location. Then the materials stock shall be moved into quality inspection stock automatically through QM module and there after the actual inspected stocks shall be sent to unrestricted use stock. Details in FICO Blue Print for excise requirements.

Goods receipt w.r.t. purchase order shall cover Standard PO, Imports PO, STO, Service Order etc. At a time GR can be made against only one purchase order. Other goods receipts include initial entry of stock balances, external goods receipts without a purchase order, goods receipts of byproducts, returns from the customer etc. If a material is delivered for a purchase order, it is important for all of the departments involved that the goods receipt entry in the system references this purchase order, for the following reasons:

•

Goods receiving can check whether the delivery actually corresponds to the order.

•

The system can propose data from the purchase order during entry of the goods receipt (for example, the material ordered, its quantity, and so on). This simplifies both data entry and checking (over deliveries and under deliveries).

•

The delivery is marked in the purchase order history. This allows the Purchasing department to monitor the purchase order history and initiate reminder procedures in the event of a late delivery.


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•

The vendor invoice is checked against the ordered quantity and the delivered quantity.

•

The goods receipt is valuated on the basis of the purchase order price or the invoice price.

When material is posted to quality inspection stock the system automatically creates an inspection lot. Once the quality check is cleared the material is transfer posted to unrestricted use stock. The materials that require quality inspection will be defaulted to Quality Inspection during the MRN. The Stock is transferred to the unrestricted use through quality procedures. The quality decision when made the stock gets transferred into unrestricted use stock or blocked stock. The quantity posted in Blocked stock will not be usable unless cleared for quality reasons. The control for these transactions can be done through the authorizations for the users. For excise entries, the following 2 processes can be adopted.

1.

The excise entries for RG23A part I and Part II are not passed but in the case of capital goods, machine spares are updated in RG23C part I and Part II, which can be performed simultaneously after GR.

At this stage when the stock is lying in quality inspection, if Invoice Verification is done, the system blocks the invoice because of quality reasons (Since quality decision has not been made for this GR Quantity) Gaps: A 4.5.1 Sub-Process Scope: Tolerance Limits For Goods Receipt AS-IS Business Process


The tolerance limits are not maintained in legacy system. But in the case of some raw materials like clays, minerals over delivery and under delivery are acceptable upto to 100kg.

When processing a goods receipt, the system checks each item to determine whether the goods receipt varies from the purchase order or the material master data.

For other materials over-delivery and under delivery are not allowed.

The different types of variances are defined by tolerance keys. For


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In case of price variance, store dept intimate the purchase dept. Purchase dept then coordinate with the vendor to finalise/resolve the variances.


each tolerance key, tolerance limits can be set per company code. The following variances are checked in Inventory Management:


•

As per SAP standard and business requirements.

For this variance, two tolerance keys are provided:

Variance in the Purchase Order Price Quantity

Tolerance key B1 (error message) Tolerance key B1 is used to define the maximum percentage variance. If the variance is greater than the maximum variance, the system creates an error message. The user cannot post the goods receipt. Tolerance key B2 (warning message) •

Variance material

for

the

moving

average

price

of

the

Tolerance key VP is used to define the percentage variance from which a warning message is issued. This warning message indicates a price change. Gaps: A 4.5.2 Sub-Process Scope: Goods Receipt against Stock Transfer Orders AS-IS Business Process


At Kajaria Ceramics whenever the requirement is given from different depot locations and showrooms, the finished products will be dispatched to the respective locations along with delivery challans

A Purchase order is created by the receiving plant to supplying plant for required materials. Materials are issued by the supplying plant with respect to purchase order to receiving plant. This material will be posted to stock in transit till goods receipt is done at receiving plant. The direct goods receipt posting is also possible while issuing the materials from issuing plant.

Business Requirements Provision should be provided for transfer of finished products form plant to plant or depot. Excise duties will be added and sent along with the materials. There will be no sale tax

When MRN is made at the receiving plant the receipt is made with reference to the Goods Issue or Outbound Delivery document prepared at the issuing plant. Excise invoice accompanies the Goods Issue. A Performa Invoice can also be generated with reference to the Goods Issue at the Issuing plant. Gaps:


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A 4.5.3 Sub-Process Scope: Goods Receipt against Service Orders AS-IS Business Process


Services are performed and delivered by the respective vendors with reference to the service purchase orders.

Purchase orders shall be created for services and Service entry sheets shall be created for the quantity of Service received. Part service of the total quantity of service mentioned in the PO can be received and Invoice verification shall be done for the invoice raised by the service vendor based on the service entry sheet created.

Business Requirements Provision for receipt of services procured should be done in system. Returnable gate pass procedure shall be applied for service

Gaps: A

materials that are going out physically for repair or services and track of the sent out materials shall also be facilitated.

4.5.4 Sub-Process Scope: Goods Receipt against Job Work / Subcontracting Orders AS-IS Business Process


At Kajaria Ceramics, semi finished materials or raw materials are sent for Job work or sub-contracting process and, is received the final product back against subcontracting challan. The final product is checked and inspected as per the quality parameters prior to making GR entry. And the invoice of the sub-contracting vendor is processed for payment release, after the satisfactory GR and inspection report

Separate Purchase orders shall be created for Jobwork / Subcontracting with item category ‘L’. The semi finished or raw materials shall be sent for final product processing, can be entered in same.

Business Requirements The subcontracting process shall be operated through the SAP standard system.

GR against job work/ subcontracting can be sorted/viewed in a system as per desired selection criteria.

Gaps: A

The raw materials or semi finished products shall be sent through sub-contracting purchase order and received the final product through standard goods receipt procedure. Delivery notes shall be prepared for outgoing material while Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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sending to subcontractor for Job work Needed to monitor the materials, which have been provided to sub-contractor at their premises.

4.5.5 Sub-Process Scope: Screen Manufacturing AS-IS Business Process Screens are required in production. Gailpur plant manufactures screens required in production for fulfilling its own requirement as well as for Sikanderabad plant. The material required for screen production is procured at Gailpur plant only. Sikanderabad plant provides only the frames for its own requirement.

Suggested Business Process Screen requirement at Sikanderabad Plant will be captured as Stock transport process where the screens are procured from Gailpur Plant. Gaps: A

The frames are sent from Sikanderabad plant to Gailpur plant through Returnable gate pass. After screen manufacturing the screens are send back to Sikanderabad. The value of screen is calculated as follows: MRP (Max. Retail Price) +15% profit +16% excise duty 2.5% Edu. Cess on excise duty value Sikanderabad plant takes the credit of excise duty paid. The iron frames in case get destroyed are sold as scrap. The value of frame is paid to Sikanderabad plant. Business Requirements STO process will be mapped as per Standard SAP process The scrapped frames or the value of frames need to be returned.


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4.5.6 Sub-Process Scope: Goods Receipt of Customer Returned Materials AS-IS Business Process


Some times, at Kajaria Ceramics, the customers shall return the materials due to quality or quantity reasons and the materials are received into the plant.

Customer returned goods will be taken into stock against Return Sales Order. It will have reference to earlier invoice.

Business Requirements The returned materials are received through Goods Receipt

Inspection related activities, will be covered in QM module. Upon satisfactory quality inspection the material is transferred to Finished Goods / Customer Returns storage location or if rejected the same transferred to Scrap Yard.

entry, physically and entered into finished products stock. Gaps: Customer return materials should be received against sales

A

return order and go through the dispatch section and quality inspection’s discretion in terms of quality and authorisations. And the GR shall be prepared, for the quantity purpose, by the stores personnel. 4.5.7 Sub-Process Scope: Rejection Handling while GR AS-IS Business Process


At Kajaria Ceramics, some incoming materials that are found defective or rejected during the inspection, are sent back to vendor and intimated about the same with return slip and gate pass with authorised signatory. The rejection handling shall be processed by stores and purchasing dept

Inspection related activities will be covered in QM module. Incoming material (local) rejected by Quality can be sent back to supplier for replacement/ as return by making return delivery using movement type ‘122’.

Gaps:

Business Requirements The returns of materials to vendor should be routed through the SAP standard system and the tracking of the details like date of return, qty, material number, document number and reason for rejection should be able to see in the system.

A

4.5.8 Sub-Process Scope: Excise Transactions while GR


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Local Procurement

Incoming Excise Invoice

After MRN entry, stores person forwards excise copy to excise In charge.

The incoming excise invoice can be captured against a purchase order, Stock transport order, outbound delivery etc. The Excise details are based on the combination of material, vendor, Chapter id, Vendor Status (SSI or Normal, etc.,) and Tax code applicable in the PO.

No entry in excise registers i.e. for Raw materials – RG23A Excise entry for Capital items/ spares – RG23C (Part I/II) In case of Service tax, Credit is taken only after payment of service is made At month end Monthly Return Report (i.e. RT12 - Cenvat Credit Availed in a month) is prepared Cenvat Utilization is done at month end. Excise payable on account of sale is adjusted against Excise credit availed (against purchase) If diff. is negative, then same amount is deposited in PLA a/c via TR6 challan. Such PLA register is also maintained. A Yearly Summary Report is generated for RT12 details

Import procurement The GR process for the import materials shall be similar to that of domestic GR process. Here the relevant CVD details and excise details if applicable shall be entered into the excise registers.

Business Requirements During the GR entry process, the applicable excise duties with respect to vendor and materials to be calculated and net value for excise payable, to be provided by the system in order to maintain them in the excise registers

Local The normal procedure of Part 1 then GRN and Part 2 can be done or Part 1 and Part 2 entries can be simultaneously updated after the GRN. In case of Partial CENVAT (for Capital goods) the On Hold account is updated by 50% and the CENVAT Availed account is updated by the 50%. It is possible to get a list of all the entries against which the rest 50% can be availed. The subcontracting challan for sending Subcontracting Vendor is also possible.

the

goods

to

the

The other transactions that shall be configured are Excise Invoice for Sales, Return of Goods, Subsequent Invoices, Excise JVs, and Creation of Excise Invoice for other movements. Imports In case of Imports, the CVD that is claimed back is processed differently from the normal procurement process. In this case, the Invoice verification for CVD is done first and then part1 is taken, GR is done and then part 2 is posted. This now creates the CENVAT postings. Cancellation of Incoming Excise Invoice: The cancellation of excise invoice can be done in case the entries are done wrong or incorrect excise invoice has been issued by the vendor. The cancellation can be done with a rejection code, which can be used for knowing the reason for cancellation of the invoice. KCL shall provide the different reasons for such cancellations, which will be used in the configuration.


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4.6 Goods Issue AS-IS Business Process


At Kajaria Ceramics Goods are issued for the following processes

Using Goods Issue component, one can post a material withdrawal or a material issue. A goods issue leads to a reduction in storage location stock.

Goods issue to Production Goods issue to Subcontractor

Standard SAP system allows goods issue against

Goods issue of Consumables Goods issue of Capital items

Business Requirements Goods issue to various departments, should be routed through SAP standard system and the consumption in quantities and values to

•

Production Order

•

Cost Centre

•

Subcontracting PO

Requisitions for Production order gets generated through MRP run. As per the BOM, the material & their qty. will appear in requisition.

be accounted and updated to the concerned departments respectively 4.6.1 Goods Issue to Production AS-IS Business Process


At Kajaria Ceramics, all the materials are issued and consumed to production directly without any requisition documents.

MRP run generates internal Production Orders. Also depending on BOM, the reservation gets created at the same time. The material can be issued against Production order.

Business Requirements All the materials that are issued and consumed should be routed through SAP standard system. This is covered in PP module.

Reservations can be created manually. The material can be issued against such reservations using movement type ‘261’. Gaps: A This is covered in PP module


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4.6.2 Goods Issue of Consumables AS-IS Business Process


Machine oils, lubricants are issued to Engineering Dept

Consumables can be issued to the requisitioning dept. against the purchase order raised. The movement type ‘201’ helps in this case. The account assignment of Cost Centre & G/L account is picked up from PO.

Business Requirements The consumables are issued from stores, against the requirement comes from the maintenance dept

Gaps: A

4.6.3 Goods Issue of Capital Items AS-IS Business Process


Capital items yet be finalised by Kajaria Ceramics

Capital items can be issued to the requisitioning dept. against the Purchase Order raised. The movement type ‘201’ helps in this case. The account assignment of Cost Centre & G/L account is picked up from PO.


In case of services availed, bill passing entry is done after the work done by supplier. 4.6.4 Sub Process Scope: Goods Issue against Job Work Purchase orders AS-IS Business Process


At Kajaria Ceramics, Jobwork or subcontracting process is undertaken. Semi finished or Raw materials are sent to the subcontractor, for the process of final product and the same shall be received from the subcontracting vendor. And the service charges, pertaining to the job work, shall be liable for payment

The material to be produced by the vendor can be ordered as a subcontract item in a purchase requisition, purchase order or scheduling agreement. Each subcontract item has one or more sub-items which contain the individual components the vendor needs to perform the subcontract work or value-added service.


The components that are provided to the subcontractor are managed as stock provided to vendor. Components in a subcontract order that are consumed can only be debited from the stock of the material provided to the particular vendor.

The system should be able to send the semi finished or finished goods to the subcontracting vendor, for performing the services for converting them into final product and the same has to be received and accounted appropriately for its’ consumption quantity and stock account quantity

ME2O transaction can be used for monitoring the stocks with subcontractor.


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4.7 Scrap Handling AS-IS Business Process


Scrap is called here as “process waste” which is generated at production running at the level of green tile. It is periodically on a random quantity-base sent for recycling.

Scrap entries at various production locations are captured through PP module. Then scrap material has to be directed to Scrap Stores

Gaps:

Business Requirements And all the scrap, which is accumulated on a daily basis, on random qty, will be sent to the reprocessing unit, for converting the same into raw materials and send to the bin again. And this should be carried out on continuous and on-going process which needs to be brought into the system

A

No scrap sale is required to be added in the system as there is no scrap is generated from the production process and if any scrap sale is done, for miscellaneous scrap, that can be done on manual financial documents 4.8 Logistics Invoice Verification AS-IS Business Process


At Kajaria Ceramics, after receipt of material or services, the store dept. user’s dept (only Quality Check) checks the vendor’s invoice for the correct prices, taxes, surcharges, value as per the purchase order document, and if it’s found satisfactory then forwards the vendors’ invoices, along with GR copy to accounts department for payment release.

Logistics Invoice Verification checks incoming invoices for accuracy with regards to content, price, and accounting.

Business Requirements The process of vendors’ invoice verification and payment release should be routed through the SAP standard system. The invoice entry shall me made with reference purchase order document and the PO document is always available for crosschecking its terms and conditions. The system should also be able to block the invoices for payments on certain circumstances / reasons and shall be

The main task of Logistics Invoice Verification is to complete the procedure of materials procurement by posting the vendor invoice and to pass on information concerning the invoice to Financial Accounting and subsequent applications. For each incoming invoice, Logistics Invoice Verification creates an MM invoice document and an FI invoice document. The invoice documents update data in: •

Materials Management

•

Financial Accounting

The Accounts department does invoice entry after the stores user makes relevant entries & verifies conditions in the PO (e.g. Price,


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released as and when required. The list of open invoices and released invoices shall be available in the system


Excise duty, freight sales tax and payment terms). If the conditions in the PO are satisfied then the Invoice forwarded to finance department. The Invoice Verification involves the following processes: 1.

Invoice

2.

Credit Memo

3.

Subsequent Debit

4.

Subsequent Credit

Invoice option is used when the payment is to be made to the vendor. Credit memo is used for materials returned back to the vendor. During invoice verification the system shall display the materials returned back to the vendor for which deductions will be made. Subsequent debit shall be used for transactions where the Original invoice has already been cleared and a subsequent invoice has been raised by the vendor for materials already sent. Example: Rate change with retrospective effect. Subsequent Credit shall be used when any deduction is to be levied on the vendor. There are 3 options that can be used for Invoice Verification. 1.

Goods / Service Item

2.

Delivery Costs

3.

Goods/Service Item + Delivery costs

Based on the Goods/Service and delivery vendors, the option shall be selected. For Advance payments – expenses are to be booked as Prepaid Expenses in FICO & then payment has to made time to time after intimation by Purchase Local Vendor Local vendor invoice shall be entered with reference to Purchase Order. More than one purchase order can also be processed at one time for one vendor. If required the vendor can be changed from the original vendor to whom the payment is to be done. If any Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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Invoice verification has been done for any GR for a PO, the quantity for this GR will not appear in the list. In case where the freight vendor is different, only those entries related to the delivery costs will be chosen for the payments to this vendor. It is also possible to raise credit memo against the goods returned to the vendor. In case of Subsequent debit/credit to be made to the vendor account, (reasons can be change of rates for previous supplies made, etc), the entries are made using the Invoice Verification. Adjustments to other accounts like Insurance claims Account, etc. can be entered with invoice verification. Unplanned delivery costs are costs which are not known at the time of creation of purchase orders and these are charged in the invoice sent by the vendor can also be entered during invoice verification. In these adjustments wherever the invoice involves the CENVAT, based on the Tax code maintained, vendor and material tax details CENVAT clearing account is prompted and will be updated on saving. Simulation facility is available for checking the accounting effect. Import Vendor Imports invoice verification is slightly different from the normal invoice verification. In this case the CVD applicable is taken into RG23 Registers. In Import PO the CVD and other conditions are maintained as delivery condition types hence the Invoice verification for the CVD part is to be done first before the GR is done. Then RG part1 entries are done then GR is done and then RG part2 entries are posted. Invoice verification is done for the Purchase Order. In this case No GR based Invoice verification is possible (This is specific to Imports only). The other functions as mentioned under Local Vendor Invoice verification are also applicable for Import Vendor. 4.8.1 Sub-Process Scope: Invoice Variance and Vendor Invoice Block AS-IS Business Process

Suggested Business Process Variance and invoice Block


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There is no provision currently to block the invoice for payment. Business Requirements This functionality is required.


If there are variances between the expected invoice values and the values in the vendor invoice, the system can automatically block invoices with variances for payment. Invoices can be reduced by a specific difference amount, or can be accepted for small variances based on totals. Before a blocked invoice can be paid, it must be released in a separate step. Variances can be due to, for example, that one of the vendors sometimes sends an invoice for a higher amount than that agreed upon in the purchase order. Sometimes, the vendor might include the entire quantity on the invoice; although all the goods have not yet been received The invoice blocking functionality ensures that the vendor is not paid until these differences have been corrected. The system can automatically block invoices, for example, if there is a price difference or when the invoice is selected for blocking at random. Automatic blocking utilizes the tolerance limits that have been set up. In addition to the blocks set automatically by the system, Invoices can also be blocked manually also. There are several blocking reasons for variances in invoice items. The tolerances are defined for: •

Quantity variance

•

Price variance

•

Purchase order price quantity variances

•

Date variance

Tolerances for lower and upper limits are defined. If a variance in an invoice item is accepted and the default value is overwritten, the system checks whether the variances are within the tolerance limits. If the tolerance limit is exceeded, the system issues a relevant message. Still the invoice can be posted in the system, but it is automatically blocked for payment. The invoice block applies to all items in an invoice. Even if only one Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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item in the invoice shows a variance, the entire invoice is blocked for payment. An invoice can be blocked due to a quality inspection. For the materials that are meant for Quality Inspection at the time of Goods Receipt, in the material master record of these materials it is defined the material is subject to inspection at the time of GR. In this case, an inspection lot is created for every goods receipt for this material. The system sets blocking reason Quality for an item in the following cases: Goods-Receipt-Based Invoice Verification The invoice is blocked if no usage decision has been made about the inspection lot for the goods receipt concerned or if the inspection lot has been rejected. No Goods-Receipt-Based Invoice Verification The invoice is blocked if no usage decision has been made for any inspection lot for the purchase order item or if the inspection lot has been rejected. Following tolerance keys will be defined for KCL:


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S No

Tolerance Key

Limit

1

AN

Amount for item without order reference

2

AP

Amount for item with order reference

3

BD

Form small differences automatically

4

BR

Percentage OPUn variance (IR before GR)

5

BW

Percentage OPUn variance (GR before IR)

6

DQ

Exceed amount: quantity variance

7

DW

Quantity variance when GR qty = zero

8

KW

Var. from condition value

9

PP

Price Variance

10

ST

Date Variance

11

VP

Moving Average Price Variance

Gaps: A 4.8.2 Sub-Process Scope: Releasing Blocked Invoices AS-IS Business Process


There is no provision in legacy system to automatically block invoices. The payment is blocked for vendors, if and when required.

If an invoice is blocked for payment, it must be released in a separate step. The invoice cannot be paid before it is released. The release can be performed manually or automatically.

Business Requirements The functionality will be incorporated as per SAP standard process.

Most blocked invoices are automatically released for payment when the balance of the goods is received or the purchase order price is adjusted. If the variances are justified, the department can release the


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invoice for payment despite the variance. If an invoice is blocked for payment when it was posted, the Payment block indicator is selected in the vendor line item of the invoice document. Financial Accounting is then unable to pay the invoice automatically. If all blocking reasons for an invoice are deleted, the invoice is automatically released. For automatic release, the system checks each blocking reason to see whether it is still valid. This can occur for invoices that were automatically blocked due to quantity, price, or date variances, or due to quality checks. If the reason is no longer valid, the system deletes it. For manual release, the system first shows a list of blocked invoices. From this list, delete individual blocking reasons, or release entire invoices. In the time between the blocking and releasing of an invoice, the cash discount period could expire. When you release an invoice, you have the opportunity to change the baseline date for payment. This extends the payment period when you release the invoice. Gaps: A 4.8.3 Sub-Process Scope: Subsequent Debit/Credit AS-IS Business Process


As required subsequent debit and credit are done. KCL also receives credit memos from vendors. KCL are generates debit note.

A subsequent debit/credit arises if a transaction has already been settled, and a further invoice or credit memo is received afterwards.


A subsequent debit/credit changes the total invoice value of a purchase order item; the total invoice quantity remains unchanged. Therefore, only a value-based update of the purchasing transaction takes place. There is no quantity-based update.

The process will be handled in SAP.

An invoice is entered as a subsequent debit if a purchase order item has already been invoiced and further costs are incurred. Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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(Example: A vendor has inadvertently invoiced at too low a price and then sends a second invoice for the difference.) Enter a credit memo as a subsequent credit if a purchase order item was invoiced at too high a price and later a credit memo is received. (Example: A vendor has inadvertently invoiced at too high a price and then sends a credit memo for the difference.) When a subsequent debit/credit is entered, the system suggests the entire invoiced quantity, but no value. The maximum quantity that can be subsequently debited or credited is the quantity that has already been invoiced. A subsequent debit/credit for a purchase order item can be entered if an invoice has already been posted for that item. A subsequent debit/credit cannot refer to a particular invoice. When a subsequent debit/credit is posted, the system posts the invoice amount to the vendor account. If the quantity to be subsequently debited or credited has already been delivered, the system makes the offsetting entry to the stock account or the price difference account, depending on the type of price control used. For purchase order items with account assignment, the system makes the offsetting entry to the consumption account. If the quantity for subsequent debit/credit has not yet been delivered, the posting is made to the GR/IR clearing account. Later, when the goods receipt is posted - depending on the price control - the system posts the debit/credit to the stock account or the price difference account, or for PO items with account assignment it posts to the consumption account.

Gaps: A 4.8.4 Sub-Process Scope: Delivery cost- Planned/Unplanned Delivery Cost AS-IS Business Process


Unplanned delivery costs are covered in Freight section. See Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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details Business Requirements The process will be handled in SAP.


Freight charges can be planned in the purchase order. More often, they are not known in detail when the purchase order is created and are entered only in Invoice Verification on the basis of the invoice. In the SAP system, delivery costs are divided into: •

Planned delivery costs

•

Unplanned delivery costs

Planned delivery costs are entered when the purchase order is created. Unplanned delivery costs are not known at the time of the purchase order, and are first entered at invoice receipt. Delivery costs can be settled together with goods items, or an invoice containing only delivery costs can be entered. Planned delivery costs are delivery costs that were agreed with the vendor, a freight forwarding agent, or a customs authority before the purchase order was made, and that are therefore entered when you enter the purchase order. It is entered item-by-item in the purchase order. They are assigned accordingly at invoice receipt. The advantage of planned delivery costs is that the delivery costs become a part of the valuation of a material at goods receipt, or for a purchase order with account assignment - are debited to the account assignment object. Planned delivery costs are not binding to one specific vendor. When planning the delivery costs in the purchase order, you can enter a specific vendor for the delivery costs (such as a freight vendor or a customs authority). However, in Invoice Verification, these delivery costs can also be posted to a different invoicing party if you enter the different vendor on the Detail tab page. Planned delivery costs can be divided into: •

Freight costs

•

Customs

Delivery costs can be invoiced in one of three ways: Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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•

Fixed amount, independent of scope of supply

•

Quantity-dependent amount

•

Percentage of value of goods to be delivered

For planned delivery costs, at relevant provisions to a clearing type, you can set up a specific This clearing account is balanced posted.

goods receipt the system posts account. Depending on the origin clearing account in Customizing. when the corresponding invoice is

If no price differences arise between the planned delivery costs from the purchase order and the requested delivery costs in the invoice, the material master record does not change when you post the invoice. If price differences do arise, these are treated in the same way as price variances for ordered materials. Unplanned delivery costs are delivery costs that were not agreed upon in the purchase order, and that are first entered at invoice receipt. When you enter the invoice, you enter the total amount of the unplanned delivery costs on the Detail tab page. You can specify whether the system automatically posts the unplanned delivery costs to the individual items, or to a separate G/L account. During automatic distribution to the invoice items, the amounts in the items are automatically increased by the delivery costs part when you post the invoice, and therefore are treated as price variances. However, the system does not perform a price check after automatically distributing the delivery costs. Unplanned delivery costs that were distributed to individual items are not listed separately in the PO history. They are already a part of the calculated value. If the unplanned delivery costs are posted to a separate G/L account, the unplanned delivery costs are not debited to the stocks or the account assignment objects. The system does not show unplanned delivery costs that are posted to a separate G/L account, in the PO history. Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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You can only post an invoice containing only unplanned delivery costs with reference to a purchase order, if at least one invoice has already been posted for the purchase order. Otherwise all the invoiced values would be zero, and it would not be possible to distribute the delivery costs. The system apportions unplanned delivery costs to the items in proportion to the total value invoiced so far and the values in the current invoice. You can also distribute unplanned delivery costs manually to individual invoice items, by changing the amounts of the invoice items. Since in this case the delivery costs are entered in the same way as price variances, the system performs a price check, and the invoices are blocked wherever the tolerances set in Customizing are exceeded. In the case of unplanned delivery costs, the costs are not split up according to their origin. The way in which the system posts unplanned delivery costs depends on the settings in Customizing. They are either distributed automatically to the individual invoice items, or posted to a separate G/L account. During automatic distribution, the unplanned delivery costs are posted according to the price control. For a material with moving average price, the system posts to the stock account as long as there is a stock coverage. For a material with standard price, the system posts the unplanned delivery costs to the price difference account you have set up.

Gaps: A 4.8.5 GR/IR Account Maintenance


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AS-IS Business Process The functionality is not there in Legacy system. The adjustments are made manually in books. Business Requirements The process will be handled in SAP.


Suggested Business Process GR/IR Account Maintenance The goods receipt/invoice receipt clearing account is used for clearing goods receipts and invoices. In the case of quantity differences between goods receipts and invoice receipts, some items remain open on the GR/IR clearing account. If further deliveries, return deliveries, invoices, or credit memos do not clear a quantity difference for a purchase order item, the GR/IR clearing account for this item have to be maintained. The GR/IR clearing account is balanced after the procurement process is completed for an item. If this is not the case, the balance must be cleared manually. The GR/IR clearing account is cleared for a purchase order item when the delivered quantity and the invoiced quantity are the same. If the invoiced quantity is greater than the delivered quantity, the system expects another goods receipt. If the delivered quantity is greater than the invoiced quantity, the system expects another invoice. Any differences on the GR/IR clearing account must be cleared. If the differences are not cleared by another goods receipt (or a credit memo) or by an invoice (or a return delivery), you must maintain the GR/IR clearing account manually. Before maintaining the GR/IR clearing account, it should be established that no further goods receipts or invoices are to be posted for a purchase order item. Clearing the GR/IR clearing account is usually performed periodically, or at the end of the fiscal year, for those PO items for which no further goods receipts or invoice receipts will be posted. If quantity differences between the goods receipt and invoice receipt for a purchase order are cleared using account maintenance, the system generates an account maintenance document. The system creates an open item on the GR/IR clearing account as


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a result of the difference between the delivered quantity and the invoiced quantity. If further goods receipts (or credit memos) or invoice receipts (or return deliveries) are expected for this purchase order, you must clear the balance manually. For a material with moving average price, the offsetting posting to clear the GR/IR clearing account is made to the stock account, unless there is no stock coverage. If the material stock is smaller than the quantity to clear, the system only partially credits/debits the actual existing stock. The remaining amount is posted to the price difference account. For a material with a standard price, the system makes the offsetting posting to the price difference account. For a purchase order item with account assignment, the system makes the offsetting entry to the consumption account.

4.9 Physical Inventory AS-IS Business Process


At Kajaria Ceramics, physical inventory is carried out for all the materials on half yearly and yearly basis

Physical inventory component allows the carrying out of physical inventory of the company’s warehouse stock for balance sheet purpose. There are different types of physical inventory procedures like Periodic Processing, Continuous inventory, Cycle counting. Any of these techniques can be used for this process.

Business Requirements All the materials are required physically to count at least once in three months and feed the figures in the SAP system and the post the differences, if found any.

Periodic Inventory In this process all the stocks in the company are physically counted on the balance sheet key date. The entire warehouse must be blocked for materials movement Continuous Inventory Continuous inventory ensures that all the material is counted at least once during the year. Stocks are counted throughout the year. Cycle Counting Cycle counting is a method of physical inventory where inventory is counted at regular intervals within a fiscal year. These intervals (or cycles) depend on the cycle counting indicator set for the


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materials. It allows fast-moving items to be counted more frequently than slow-moving items. 4.10 Vendor Evaluation AS-IS Business Process


At Kajaria Ceramics, vendor evaluation is taken care by purchase dept., manually, for each vendor, for raw materials and packaging materials and it’s calculated based on the delivery, price, service and quality parameters like weightage is given as per the points fixed for each criteria,

Vendor Evaluation helps to select sources of supply and facilitate the continual monitoring of existing supply relationships. It provides you with accurate information on prices, and terms of payment and delivery. By evaluating vendors, you can improve your enterprise's competitiveness.

The criteria, includes

Vendor Evaluation is completely integrated with Materials Management. This means that information such as delivery dates, prices, and quantities can be taken from purchase orders. Also details about goods receipt are accessed from Inventory Management.

a) Price b)Quality c)Delivery d) Service

Business Requirements Vendor evaluation shall be maintained through SAP standard system, for desired vendors, based the scoring, rating, scales and criteria analysis for a specified period and this is based on the Price, Quality, Delivery and Service.

Vendor Evaluation also uses data from the Quality Management component, such as the results of incoming inspections or quality audits. Scores and Criteria SAP System offers a scoring range from 1 to 100 points, which is used to measure the performance of your vendors on the basis of five main criteria. You can determine and compare the performance of your vendors by reference to their overall scores. The main criteria available in the standard system are: •

Price

•

Quality

•

Delivery

•

General service/support

These four main criteria serve as a basis for evaluating vendors from whom you procure materials. •

External service provision

This main criterion serves as a basis for evaluating those vendors Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL

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you employ as external service providers. You can assign different weights to the individual criteria. The vendor’s overall score is computed taking into account the weighted scores awarded for each of the main criteria. Vendor Evaluation System ensures that evaluation of vendors is objective, since all vendors are assessed according to uniform criteria and the scores are computed automatically. In this way, subjective impressions and judgments can be largely eliminated. To create a detailed evaluation, each main criterion can be divided into several subcriteria. The standard system provides you with certain subcriteria, which suffice as a basis for evaluation. You can also define your own additional subcriteria. Scoring Methods The scores for the subcriteria are calculated in different ways. •

Fully automatically

•

Semi-automatically

•

Manually

Analyses The results of vendor evaluation are displayed in the form of analyses. For example, you can generate ranking lists of the best vendors according to their overall scores or ranking lists for specific materials.


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MM BBP KCL

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