Maintaining Product Master Data

The material or product master contains information about all the physical materials that are procured, produced, stored and sold. It is also used to manage information about services for instance for buying and selling services in hours.

The material master holds information such as unique material number, name, material type, unit of measure, descriptions, weight and dimensions. This material information is used and stored in transactions such as sales orders, deliveries, purchase orders and goods movements.

As all information for one material is stored centrally and all areas, such as purchasing, inventory management, materials planning, and invoice verification, can jointly use the stored data. For this reason, the material master information is organized into different views. For example, purchasing, sales, storage, MRP, costing and accounting.

Some information in each material is specific to particular organizational units. For example, a sales description is specific to a sales unit (known as sales area), a MRP controller is specific to a specific site (known as a plant) or some information might be specific to a storage location.

So, is it called a material or a product? In SAP S/4HANA Cloud, the correct term to use is product. However, due to the effort required, it hasn't been possible to remove all references to the material. So, you will still see both terms used in SAP S/4HANA Cloud.

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

You can create material master data using the Manage Product Master Data SAP Fiori app and/orCreate Material app.

The data screens used to process material master records can be subdivided into the following types:

• Main data:

  These are the screens (on the Create Material app) for the individual user departments, such as basic data, materials planning, and so on.

• Additional data:

  On these screens you find additional information, such as alternative units of measure, material short descriptions, and consumption values.

The data maintained within a view may be valid for different organizational levels.

Some material data is valid for all organizational levels, while some is valid for certain levels only. For example, a distinction is made for the following levels:

• Client level:

  General (Central) Data does not depend on an organizational unit or the company code. This level contains the data applicable to all individual group companies, plants, warehouses, or stores belonging to an enterprise (corporate group). Examples of material data that are valid client-wide are the goods group, the short text of material, and the base unit of measure.

  Some of the data for purchasing or inventory management is also maintained at the client level. This data includes, for example, the purchase order text, the purchase order unit, the purchasing value key, and specifications for the shelf life expiration date check.

• Plant level:

  This level contains the data that you can define for each plant. This includes, for example, some data for purchasing and inventory management, but also data for material valuation or material requirements planning. Examples of plant-specific material data are the purchasing group, the goods receipt processing time, the valuation class, the price control, the MRP type, and the MRP controller.

• Storage location level:

  All data that is valid for a particular storage location is stored at this level, for example, the storage bin.

When creating a new material/product master record, you must choose a material type and an industry sector to which to assign the material. The standard content in SAP S/4HANA Cloud only provides one industry sector M (Mechanical Engineering) and is assigned to industry sector M by default. Materials with the same properties are assigned to the same material type. Examples of material types are raw materials, semi-finished products, and finished products.

Among other things, the material type controls:

• The type of number assignment (internal or external)

• The permissible number range intervals

• Which user-department-specific is proposed for entry (in views)

• Which procurement type is allowed for a material (that is, whether the material is produced in-house, procured externally, or both)

Along with the plant, the material type controls whether the stock is to be managed on a quantity and/or value basis.

Various types of material are available for use in the standard SAP system. If your company needs additional material types, you can define these according to your requirements using the configuration app (SSCUI) Define Attributes of Material Types (Configure Product Types) by copying an existing product type.

In the following tutorial you can learn how to create material master data using the Create Material app.

Material valuation determines or records the stock value of a material/product. 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.

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 consider 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?

The price control procedure set in the material master record determines the value used to valuate the goods receipt of a material, and how price variances resulting from goods receipt or invoice receipt are handled. Material valuation can be carried out according to the standard price (S price) or the moving average price (V price).

• 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 taken into account in stock valuation.

• Moving average price (price control V):

  When you valuate with the moving average price (MAP), all goods receipts for purchase order 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.

The Valuation of Goods Receipt figure clarifies both valuation procedures in a simple example.

Explanation:

• Material: Moving average price EUR 20

  The goods receipt for a purchase order of 10 pieces at EUR 25 is valuated with a procurement price of EUR 25. An amount of 10 at EUR 25 = EUR 250 is posted to the stock account. The offsetting entry for the same amount is posted to the GR/IR clearing account.

• Material: Standard price EUR 20

  The goods receipt quantity must be valuated with the standard price. The result of the goods receipt for the purchase order of 10 pieces is an amount of 10 at EUR 20 = EUR 200. This amount is posted to the stock account. The difference of EUR 50 from the actual procurement value (10 at EUR 25 = EUR 250) is posted to a price differences expense account. The offsetting entry with an amount of 10 at EUR 25 = EUR 250 is posted to the GR/IR clearing account.

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 material/product.

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 depend on the material type and can be configured in the configuration (SSCUI) app Define Valuation Classes in the Database and Data Management → Product → Product. A valuation class can also be assigned to several material types.

The opening balance for stock quantity and total value are displayed in the first row.

The following steps are:

• Goods receipt (GR) for a purchase order of 100 pieces at 2.40 (second line)

• Invoice receipt (IR) of 100 pieces at 2.20 (third line)

At goods receipt, the stock quantity and stock value are updated in the product/material master record. The stock account, and thus the stock value, are updated by the amount "goods receipt quantity x standard price". To the GR/IR clearing account, the "goods receipt quantity x purchase order price" amount is posted. The difference between the purchase order price and the standard price is posted to the price difference account.

When the incoming invoice is posted, the GR/IR clearing account is cleared at the order price. The supplier account is updated at the invoice price. The difference between the purchase order price and the invoice price is posted to the "Income from price differences" account. It does not change the total stock value.

The opening balance for stock quantity and total value are displayed in the first row.

The following steps are:

• Goods receipt (GR) for a purchase order of 100 PC at 2.40 (second line)

• Invoice receipt (IR) of 100 PC at 2.20 (third line)

During goods receipt the system updates the stock value, stock account, and GR/IR clearing account at the purchase order price. The moving average price is recalculated based on the new stock value as follows: moving average price (for each base unit of measure) = total value / total stock.

When the incoming invoice is posted, the GR/IR clearing account is cleared at the order price. The supplier (creditor) account is updated at the invoice price. The system posts the difference between the purchase order price and the invoice price to the stock account. It recalculates the stock value based on the invoice price. For this, the moving average price is also recalculated based on the new stock value.

If the stock quantity at the time of invoice entry is less than the invoice quantity, the system posts part of the difference to the "Expenditure/income from price difference" account instead of the stock account.