In Material Management, we procure either for material or for direct consumption.
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 is received by or issued from stores or from warehouse, the stock in hand is increased or reduced by the amount of 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. 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, cost center). On goods receipt, the material or service counts as having been consumed.
If a material is procured for direct consumption, the consumption account for Financial Accounting is posted when the goods receipt is entered. The total quantity and value of existing stocks for the material are not affected.
Material Account Assignment - 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 for 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.
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Great article!
ReplyDeleteYou've done an excellent job explaining the nuances between procurement for stock and procurement for consumption. This is a topic that often gets overlooked, but it's absolutely critical in the world of supply chain management and procurement.
I appreciated your clear and concise explanations of both approaches. It's crucial for businesses to understand when to use each method to optimize their inventory and cost management. The examples you provided really helped illustrate the concepts.
I particularly liked how you emphasized the importance of demand forecasting in procurement for consumption. In today's fast-paced business environment, accurate demand forecasting can make all the difference in minimizing waste and ensuring products are available when needed.
Your blog consistently provides valuable insights into SAP Material Management, and I always look forward to reading your posts. Keep up the excellent work!