Maintaining Material Master Data

The material master record is a company’s central source of material-specific data. It is used in all areas of logistics. The integration of all material data in a single database object eliminates the problem of data redundancy. All areas, such as purchasing, inventory management, materials planning, and invoice verification, can jointly use the stored data.

The data stored in the material master is required for many activities, including the following:

• Purchasing data for ordering purposes

• Inventory management data for posting goods movements and physical inventory management

• Accounting data for material valuation

• Material planning data for material requirements planning

Various departments within a company work with material data, and each department stores different information relating to a material. Therefore, the data in the material master record is sorted into individual views reflecting the various departments.

The organizational levels mentioned previously are relevant for the external procurement process. Client, plant, and storage location play a role when you enter data for purchasing, inventory management, and accounting. Other organizational levels can be relevant for other departments. For example, the sales and distribution data is entered depending on the sales organization and the distribution channel, and you must specify a warehouse number and storage type for the warehouse management data.

The structuring of material data by user departments and organizational levels is also apparent in material master record maintenance. When processing material master records, you have to pass through several dialog screens before you start to add, change, or display data.

On the initial screen, you see two successive dialog boxes. In the first dialog box, specify the views that you want to process. In the second dialog box, specify the relevant organization levels. Next, you see the data screens. You can influence the default screen sequence by configuring the presettings.

Various types of material are available for use in the standard SAP system. If your company needs more material types, you can define these according to your requirements in Customizing.

Like the material type, the industry sector also has a control function. The industry sector you assigned when creating a material master record cannot be changed later.

Material valuation determines or records the stock value of a material. The following relationship applies to the valuation price, the stock quantity, and the stock value in the material master record:

Stock value = stock quantity x material valuation price

From this formula it follows that the stock value changes when the stock quantity or valuation price changes.

During the valuation of a goods movement, not only the total value (and if necessary, the valuation price) are updated in the material master record, but also the accounts in Financial Accounting. Material Valuation represents a link between Materials Management (MM) and Financial Accounting (FI), since it updates the G/L accounts in Financial Accounting.

Two factors control material valuation:

• System setting (Customizing)

• Material master record

In the material master record, you enter the necessary valuation data for a material in the accounting data. Depending on the valuation area, you must specify either the company code or plant when maintaining the accounting data.

When entering the accounting data, you must answer the following questions:

• Is the stock of a material to be valuated at a constant price, or should the price be adjusted to match the fluctuations of the cost price?

• In which G/L account should the stock value of this material be managed?

• Standard price (price control S):

  When you valuate with the standard price (price control S), all inventory posting is carried out at the standard price defined in the material master record. If a goods receipt or invoice receipt contains a price that differs from the standard price, this difference is posted to a price difference account. The variance is not considered in stock valuation.

• Moving average price (price control V):

  When you valuate with the moving average price (MAP), all goods receipts for PO are valuated with the purchase order price (Other goods movements are posted with the current moving average price). A difference between the purchase order price and the invoice price is posted directly to the relevant stock account if there is sufficient stock coverage. This changes the value of the stock and the moving average price of the material. The price in the material master is adjusted to the purchase price.

  The system automatically calculates the moving average price as follows: Total stock value / total stock quantity = moving average price.

In automatic account determination, the SAP system works with valuation classes. The valuation class is used to determine which stock account is to be updated during the goods movements of a material.

You can use the valuation class to combine materials for assigning G/L accounts so that you do not have to manage a separate stock account for each material. You maintain the valuation class in the Accounting view of the material master record. The valuation classes allowed for a material depends on the material type and can be configured in Customizing. A valuation class can also be assigned to several material types.