- SAP Managed Tags
In today’s customer-centric business environment, organisations must ensure the efficient fulfilment of customer demands, even when products or services are not available in-house. This is where Third-Party Procurement and Individual Purchase Order processes in SAP play a vital role. These functionalities, part of the seamless integration between SAP Sales and Distribution (SD) and Materials Management (MM) modules, enable companies to procure goods directly from external vendors to meet customer requirements without holding inventory.
This blog aims to provide a clear understanding of how SAP handles third-party order processing and individual purchase orders, highlighting the underlying configuration, document flow, and business benefits.
Step 1: Configuration Steps
Maintain Purchase Organisation
Path: SPRO -> Enterprise Structure -> Definition -> Materials Management -> Maintain purchasing organization
Step 2: Assign Purchase Organisation
Path: SPRO -> Enterprise Structure -> Assignment -> Materials Management -> Assign purchasing organisation to company code
Path: SPRO -> Enterprise Structure -> Assignment -> Materials Management -> Assign purchasing organisation to plant
Step 3: Assign Item Categories
Path: SPRO -> Sales and Distribution -> Sales -> Sales Documents -> Sales Document Item -> Assign Item Categories
Step 4: Create a customer Record (Transaction: BP)
You can refer link below and follow the suggested steps to create a BP record.
Business Partner(BP) Complete Configuration Guide in SAP S4 HANA
Step 5: Create Material Master Record (Transaction: MM01)
Maintain the General Item Category group and Item category group data in the sales org. view 2
Step 6: Define Schedule Line Categories
Path: SPRO -> Sales and Distribution -> Sales -> Sales Documents -> Schedule Lines -> Define Schedule Line Categories
Order Type: It enables the automatic generation of a purchase requisition in the background during the creation of a sales order in a third-party process.
Item Category: In the third-party procurement process, the PR is generated automatically in the background. To facilitate this, the system derives and passes the required item category information from the schedule line category to the purchase requisition.
The item category 5 ensures that when MIGO is performed in a third-party scenario with a shipping notification, the system treats it as a dummy goods movement, meaning the stock is not updated in inventory.
Step 7: Define Shipping Points
Path: SPRO -> Materials Management -> Purchasing -> Purchase Order - > Set up STO -> Define shipping points
Step 8: Create Sales Order (Transaction: VA01)
Check for PR Number in Display Sales Order
Step 9: Convert Purchase Request into Purchase Order (Transaction: ME21N)
Check the Sales Document process flow
Step 10: Post Incoming Invoice (Transaction: MIRO)
Individual Purchase Order Process
The IPO process is triggered during sales order creation when a specific item category (e.g., TAB) is assigned. This item category configuration signals the system to create a Purchase Requisition (PR) automatically, linking it to the sales order item. Unlike standard procurement, the goods procured are not stocked for general use - they are tied exclusively to that customer order.
Step 1: Assign Item Categories
Path: SPRO -> Sales and Distribution -> Sales -> Sales Documents -> Sales Document Item -> Assign Item Categories
Step 2: Create Material Master Record (Transaction: MM01)
Maintain the General Item Category group and Item category group data in the sales org. view 2
Step 3: Define Schedule Line Categories
Path: SPRO -> Sales and Distribution -> Sales -> Sales Documents -> Schedule Lines -> Define Schedule Line Categories
Step 4: Create Sales Order (Transaction: VA01)
Check the PR Number in the Display Sales Order
Step 5: Convert PR into PO (Transaction: ME21N)
Refer to step 9 above for more detailed steps
Step 6: Check Stock (Transaction: MMBE)
Step 7: Post Goods Movement (Transaction: MIGO)
Check stock
Step 8: Post Incoming Invoice (Transaction: MIRO)
PO History
Regards,
Leelamohan Mannem
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