SAP MM Study Notes
S4500 · Business Processes in SAP S/4HANA Sourcing and Procurement · Unit 8

Unit 8: Automated Procurement Process

A fully automated procure-to-pay chain needs no manual document entry: MRP finds the shortage and creates a requisition with a source of supply, ME59N turns it into a PO, the warehouse posts the GR, and Evaluated Receipt Settlement creates the invoice. This unit covers each automation step and its prerequisites.

MRP (MD01N)→PR with source→Automatic PO (ME59N)→GR (MIGO)→ERS invoice (MRRL)→Payment

Lesson 1 · Running Materials Requirements Planning

After this lesson you can

  • Sketch the MRP process, procurement elements and planning levels (MRP areas)
  • Explain consumption-based procedures, reorder point planning, lot sizes and forward scheduling
  • Explain MRP data in the material master and source determination in MRP

Key concepts

MRP ensures material availability: it monitors stock, detects shortages and creates procurement proposals for purchasing and production in time. SAP S/4HANA offers the classic MRP run and the HANA-optimized MRP Live.

Procurement elementCharacterCreated for
Planned orderInternal planning element, freely changeableIn-house production (converted to production order); in classic MRP optionally also for external procurement (must be converted into a PR by the MRP controller before purchasing sees it)
Purchase requisitionInternal, changeable; immediately visible to purchasingExternal procurement
Delivery schedule lineBinding, fixed elementExternal procurement with a valid scheduling agreement
MRP Live (MD01N)Classic MRP (MD01, MD02, MD03)
External procurementAlways schedule lines if a valid scheduling agreement exists, otherwise PRsCreation indicator on the initial screen decides: planned order or PR, and whether schedule lines are created

Planning level: MRP areas

MRP plans per MRP area, which always lies within one plant (never cross-plant).

MRP area typeDescription
Plant MRP areaCreated automatically per plant, same number as the plant; covers the whole plant unless other areas exist. No configuration needed.
Storage location MRP areaOne or more storage locations planned separately; these storage locations are removed from the plant MRP area.
Subcontractor MRP areaPlans components to be provided to one subcontractor separately; defined by assigning the supplier.

Example structures: plant planned as a whole (default); one storage location planned separately (one storage location MRP area, rest stays in plant area); plant split into two storage-location areas plus a subcontractor area.

Other prerequisites: plant parameters in Customizing (number ranges, purchasing processing time, stocks to include …) and MRP data in the material master at plant level (plus MRP-area data where needed).

SPRO › Production › Material Requirements Planning › Master Data › MRP Areas › Define MRP Areas SPRO › Production › Material Requirements Planning › Plant Parameters › Carry Out Overall Maintenance of Plant Parameters

MRP procedures

GroupBasisTypical use
Consumption-based planningPast consumption; sales orders, planned independent requirements and reservations are not planned (only displayed)Plants without own production, B and C parts, auxiliary/operating supplies
Demand-driven (MRP)Actual and planned requirements (sales orders, PIRs, dependent requirements)Finished products, important assemblies and components
Consumption-based procedureMRP type (example)How it works
Manual reorder point planningVBMRP controller enters the reorder point
Automatic reorder point planningVMForecast calculates reorder point (and safety stock)
Forecast-based planningVVFuture requirements from forecast on consumption values
Time-phased planningR1As forecast-based but only on fixed planning days (rhythmic)

The procedure is set per material per plant/MRP area, so the same material can be planned differently in different plants.

Reorder point planning

Reorder point = average requirement during the replenishment lead time + safety stock. The safety stock covers extra consumption and delivery delays. During the run the system calculates:

  • Available stock = warehouse stock in the MRP area + fixed receipts (POs, firmed planned orders, firmed PRs).
  • If available stock < reorder point → shortage = reorder point − available stock.

Static lot sizes

Lot-size keyProcedureResult
EXLot-for-lotOne proposal for the exact shortage quantity per day
FXFixed lot sizeProposal of the fixed lot size; several on the same date if one is not enough
HBReplenish to maximum stock levelQuantity needed to reach the maximum stock

Static procedures ignore future shortages; periodic and optimizing lot-sizing procedures also exist but are not covered here.

Forward scheduling for external procurement

PR creation date→+ Purchasing processing time (workdays, plant parameters)→Order date→+ Planned delivery time (calendar days)→Delivery date→+ GR processing time (workdays)→Availability date

Planned delivery time can come from the material master, info record or contract; GR processing time from material master or contract.

MRP data in the material master

ViewKey fields
MRP 1MRP type (controls procedure and required fields), reorder point, MRP controller, lot size key and its parameters (fixed lot, max. stock)
MRP 2Procurement type (E in-house, F external, X both), special procurement type (e.g. consignment, subcontracting, stock transfer), GR processing time, planned delivery time, safety stock

Plant-level data applies to the plant MRP area. MRP-area-specific data (for storage location or subcontractor areas) overrules plant data; if none exists, S/4HANA uses the plant parameters. A subcontracting MRP area should exist for each subcontractor, but area-specific material data is not mandatory for every component.

Source determination in MRP

After net requirements and lot sizes are calculated, MRP decides between in-house and external procurement and, for procurement type F, the source. Possible sources: info records, outline agreement items (contracts, scheduling agreements) and other plants (stock transfer; a plant can also be represented as a supplier by assigning it in the BP general data).

  1. Scheduling agreement valid → MRP Live always creates schedule lines (classic MRP per creation indicator).
  2. Contract valid → PR assigned to the contract.
  3. Info record with automatic sourcing indicator → PR assigned to that info record.

This default can be overruled by source lists and quota arrangements; quota arrangements have the higher priority.

System steps

  1. Maintain MRP 1/2 views (MM02), e.g. MRP type VB, reorder point, lot size FX.
  2. Run MRP Live with MD01N (or Fiori Schedule MRP Runs); single material classic: MD03.
  3. Check the result in the stock/requirements list MD04 (dynamic) or MRP list MD05; Fiori Monitor Material Coverage.
  4. Check the generated PRs and assigned sources in ME53N / ME5A; maintain quota arrangements with MEQ1.
Newer releases (2021–2025)

MRP Live (MD01N) is the recommended planning run in SAP S/4HANA; MRP areas are always active and cannot be switched off. Source lists are not required for MRP sourcing anymore – info records with the automatic sourcing indicator are enough. Newer releases add predictive MRP and demand-driven replenishment (DDMRP) as optional functions, and planning file entries are handled in the table PPH_DBVM.

Exam focus
  • Reorder point: available stock (stock + fixed receipts) compared with reorder point (not physical stock, not safety stock).
  • MRP type controls the planning procedure (not procurement type or lot size).
  • Sources of supply: plant, info record, contract, scheduling agreement – not the source list or release order.
  • In S/4HANA a source list entry flagged for MRP is not mandatory for unique sourcing (statement is false).
  • MRP sourcing order: scheduling agreement → contract → info record with automatic sourcing; quota arrangement > source list.
  • Times: purchasing processing time (plant parameters, workdays), planned delivery time (calendar days), GR processing time (workdays).

Lesson 2 · Generating Purchase Orders Automatically

After this lesson you can

  • Convert purchase requisitions automatically into POs and list the prerequisites

Key concepts

When MRP has assigned a source to the PR item, the item carries all data needed for a PO – supplier, price, conditions. The automatic PO function then creates the PO without buyer intervention. Prerequisites:

PrerequisiteLocation
Automatic PO indicatorMaterial master – Purchasing view
Automatic PO indicatorSupplier (BP) – purchasing organization data
Valid source of supplyAssigned in the PR item
No additional entries requirede.g. the tax code for ERS must already be available (from info record/contract)

System steps

  1. Run ME59N with selection (purchasing group/organization, supplier, plant, MRP controller …) and grouping options; tick "exclude items with errors" if desired.
  2. Schedule it as a periodic background job right after the MRP run so new PRs become POs automatically.
  3. Check the log and the created POs (ME2N); output is sent according to message settings.
Exam focus
  • Four prerequisites: valid source in PR item, Automatic PO in material, Automatic PO in supplier, no extra entries needed (e.g. tax code).
  • The ERS indicator in the supplier is not a prerequisite for automatic PO creation.

Lesson 3 · Creating Invoices Automatically Using Evaluated Receipt Settlement

After this lesson you can

  • Explain the ERS principle and the data used to calculate the invoice
  • List all ERS prerequisites and execute ERS

Key concepts

With Evaluated Receipt Settlement (ERS) you agree with the supplier that it sends no invoices. Instead, the system creates the invoice from the goods receipts. From the supplier's view this is a credit memo (self-billing), and a settlement message can inform the supplier. The amount is derived from:

  • GR quantities not yet settled (from the PO history),
  • the PO item price,
  • the tax code of the PO item,
  • the payment terms in the PO header.

Prerequisites

ObjectSetting
Supplier master (purchasing data)ERS indicator (automatic GR settlement) set; payment terms can be defaulted here
PO headerPayment terms key
PO itemERS indicator (proposed, maintainable only if set in supplier); GR-based invoice verification indicator (from supplier or info record); tax code (e.g. from info record or contract item)
Info record"No ERS" indicator must not be set (it excludes the material/supplier combination)
Customizing (optional)Automatic settlement of planned delivery costs activated per company code / purchasing organization / supplier

How the PO was created (manually or automatically) does not matter.

SPRO › Materials Management › Logistics Invoice Verification › Automatic Settlement › Specify Automatic Settlement of Planned Delivery Costs

Execution

  1. Online: Fiori Create Evaluated Receipt Settlement or SAP GUI MRRL – select by company code, supplier, plant, posting date; the system groups GRs into invoices using predefined document splits (e.g. per PO, per PO item, per delivery).
  2. Test run first, then real run; check the created invoice documents (MIR4).
  3. Periodic: schedule with MRRL variants or the Fiori app Schedule Supplier Invoice Jobs – Advanced and monitor there.
Accounting effectDebitCredit
ERS invoiceGR/IR clearing (WRX) + input taxSupplier account
Practical tip

ERS is closely related to consignment settlement (MRKO) and invoicing plans (MRIS) – all three create invoices without a paper invoice from the supplier.

Exam focus
  • ERS indicator must be set in the supplier and PO item; GR-based IV and tax code required in the PO item; payment terms in PO header.
  • Info record "No ERS" excludes the combination.
  • Automatic PO creation is not a prerequisite for ERS.
  • ERS invoice data: unsettled GR quantity × PO price, PO tax code, PO payment terms.

Unit summary & exam focus

MRP (classic or Live) plans per MRP area, calculates shortages, lot sizes and dates, and assigns sources (scheduling agreement → contract → info record, overruled by quota arrangements and source lists). ME59N converts sourced PRs to POs, and ERS replaces supplier invoices with system-generated settlements.

T-codes in this unit

T-codePurpose
MD01NMRP Live
MD01Classic MRP total planning
MD02Classic MRP single-item, multi-level
MD03Classic MRP single-item, single-level
MD04Stock/requirements list
MD05MRP list
MM02Change material (MRP views)
MEQ1Maintain quota arrangement
ME53NDisplay purchase requisition
ME5AList purchase requisitions
ME59NAutomatic creation of POs
ME2NPurchasing documents by number
MRRLEvaluated Receipt Settlement
MIR4Display invoice document
MRKOConsignment settlement
MRISInvoicing plan settlement

Self-check questions

  1. What is compared with the reorder point in reorder point planning?
    AnswerThe available stock = warehouse stock in the MRP area plus fixed receipts.
  2. Which field controls the planning procedure of a material?
    AnswerThe MRP type (MRP 1 view).
  3. Which MRP area types exist?
    AnswerPlant, storage location and subcontractor MRP areas – all within one plant.
  4. In which order does MRP look for a source for an externally procured material?
    AnswerScheduling agreement → contract → info record with automatic sourcing indicator; can be overruled by quota arrangements (highest) and source lists.
  5. Is a source list mandatory for MRP sourcing in S/4HANA?
    AnswerNo. That was the case in SAP ECC; in S/4HANA it is optional.
  6. Which settings are needed for ME59N?
    AnswerAutomatic PO in material and supplier, valid source in the PR item, and no extra entries (e.g. tax code) needed.
  7. Name the ERS prerequisites.
    AnswerERS in supplier and PO item, GR-based IV and tax code in PO item, payment terms in PO header, "No ERS" not set in info record.
  8. Which lot-sizing key creates a proposal for exactly the shortage quantity?
    AnswerEX (lot-for-lot).