DIRECT MATERIAL PROCUREMENT and INDIRECT MATERIAL PROCUREMENT

please explain , what is the differance between DIRECT MATERIAL PROCUREMENT and INDIRECT MATERIAL PROCUREMENT.please explain with example.

source: http://www.ftpress.com/articles/article.aspx?p=24168
Procurement materials can be broken down into two major categories: indirect and direct.
u2022
Indirect procurement involves any commodity or service that a company buys that does not result directly in finished goods.
u2022
Indirect procurement can be divided into two groups: ORM (Operations Resource Management) materials such as office products and travel services, and MRO (Maintenance, Repair and Operations) materials such as replacement parts.
u2022
Direct procurement involves materials purchased for use in the manufacturing or distribution supply chain that are "directly" related to the production of finished goods.

Similar Messages

  • Direct procurement and Indirect Procurement in SAP AFS

    Hi,
    Can you diffrentiate between Direct procurement and Indirect Procurement in SAP AFS.
    thanks
    Aki

    Hi Aki,
    Direct Procurement
    Raw Material and Production Goods
    Order Qty: Large
    Value: Industry specific (Like shirt in apparel industry)
    Direct procurement supports the conversion of planned requirements to purchase orders.
    Primary Processes-Direct Procurement
    1. Determination of the materials and services required.
    2. Create requisition.
    3. Request for the quotation.
    4. Quotation Management.
    5. Vendor selection.
    6. Create Purchase Order.
    7. Goods Receipt and Invoice Receipt.
    8. Invoice Verification/ Vendor Payment.
    Indirect Procurement
    Maintenance, Repair and Operating (MRO) Supplies
    Order Qty: Low     
    Value: Generic (Machine Spare Parts in any industry)
    Indirect procurement supports the purchasing of indirect materials and subcontracting.
    This process can be dealt with using standard functions such as material requirements planning, purchase requisition, stock transport order, transportation planning and the handling of internal deliveries.
    The cross-plant, internal procurement of materials can be carried out within one company code (intercompany) or by using several company codes (cross company).
    Primary Processes-Indirect Procurement
    1. Requisitioning
    2. Purchase Order Management
    3. Receiving
    4. Financial Settlement
    Hope it helps.
    Regards,
    Anirban Roy

  • Direct Procurement and Indirect Procurement

    Please explain the different between direct procurement and Indirect procurement??

    Hi,
    Direct Procurement
    Raw Material and Production Goods
    Order Qty: Large
    Value: Industry specific (Like shirt in apparel industry)
    Direct procurement supports the conversion of planned requirements to purchase orders.
    Primary Processes-Direct Procurement
    1. Determination of the materials and services required.
    2. Create requisition.
    3. Request for the quotation.
    4. Quotation Management.
    5. Vendor selection.
    6. Create Purchase Order.
    7. Goods Receipt and Invoice Receipt.
    8. Invoice Verification/ Vendor Payment.
    Indirect Procurement
    Maintenance, Repair and Operating (MRO) Supplies
    Order Qty: Low
    Value: Generic (Machine Spare Parts in any industry)
    Indirect procurement supports the purchasing of indirect materials and subcontracting.
    This process can be dealt with using standard functions such as material requirements planning, purchase requisition, stock transport order, transportation planning and the handling of internal deliveries.
    The cross-plant, internal procurement of materials can be carried out within one company code (intercompany) or by using several company codes (cross company).
    Primary Processes-Indirect Procurement
    1. Requisitioning
    2. Purchase Order Management
    3. Receiving
    4. Financial Settlement
    Hope it helps.
    Regards
    KK

  • Direct material and indirect material

    please explain the what is direct material and indirect material and its different between them

    Hi.
    Direct materils: These material are bulkly needed and regularly needed for that orgnization to have their end product.  these materials usually raw materials ....
    Indirect materials: these materils are needed with direct materlias  for the manufacture or to produce end product.
    Ex: If your orgn's is cement Industry.
    Direct materials: Silica Sand. etc..
    Indirect matrials:BAG. Gypisum.....
    Hope you are Understand with these example...
    Regards
    S B H

  • What is direct procurement and indirect procurement?

    Dear Gurus,
    What is What is direct procurement and indirect procurement from purchasing point of view.
    Pls briefly explain with examples.
    Thanks in advance..

    Direct procurement. Direct categories are all goods purchased by the company which directly enter into the production process of that company. For the food industry as an example, ingredients and packaging will be the key direct procurement categories.
    Indirect Procurement. Indirect categories are all the goods and services that are bought by the company to enable its activity. This entails a wide scope, including marketing related services (media buying, agencies), IT related services (hardware, software), HR related services (recruitment agencies, training), facilities management and office services (Telecoms, furniture, cleaning, catering, printers), or utilities (gas, electricity, water)...etc
    Regards
    Lakshminath Gunda

  • Self service procurement and plan driven procurement in classic scenario

    hai friends,
    i have configured self service procurement and now i am configuring plan driven procurement in classic scenario.my doubt is suppose  a shopping cart is created and placed in a sourcing application of the professional buyer.And assume he accomplished sourcing activity and created purchase order .Now purchase order is created locally or in the backed.i am using classic scenario ,now can u tell where the purchase order is located? if i want to place that particular purchase order in SRM  it self what will i do? thanks in advance.

    Hi Chandra
    before going to select Business scenario (self service, plan driven..etc), you must freeze the technical scenario. Depends upon your technical scenario, your PO will be created .
    Where PO is created it is called leading system. It is SAP standard.
    If you were selected  Classic- Po created in R/3.- R/3 is a leading system .
    if you were select ECS- > PO will created in SRM and Copy also will be created in R/3 system. In EBP only you can edit the PO not in r/3. here SRM is a Leading system.
    regards
    Muthu

  • Difference between material group and external material group

    Hi,
    Can anybody let me know the difference between the material group and external materila group from the business perspective.
    Thanks

    Hi Raghunandan,
    Material Group : Materials having similar attributes will be goruped together and assigned to a Material Group.
    Material groups are Extensively useful during :
    Limit the Scope of Analysis
    Reporting Purpose
    External material group : Key that you can use to assign the material to an external material group or to a material group determined according to external systematics.
    In General, External material groups are nothing but external representation of group of material  which are extensively used in supply souce determination for provions materials related to retail and some other functions
    In short if your Internal material group for example bearing is 0001 you can group externally further based on manufacturer like FAG for NRB. No accounting activity is based on it
    Reg,
    Ashok

  • Valucation Type PROD_PRICE (material price) and NET_COST(Material net cost)

    Hello gurus,
    When transfer BOM to GTS, we got two values in product master under price tab:
    Valuation type PROD_PRICE: 1000USD (valude is same to standard price in ECC material master)
    Valuation type NET_COST: 900USD (where it is from?)
    Can you please tell the difference between above two?  In most cases, those two types have same values in product, but sometimes they are different.
    Thank you,
    Ryan

    Hi ,
    Please check the Valuant variant assigned against the step " Define Goods Received Valuation for Order Delivery" in IMG under Product cost by Order.
    This will have impact on the valuation.
    Njoy
    Siva
    Check the Price strategy for Materials. SAP help says as below :
    ================================================================
    Define Goods Received Valuation for Order Delivery
    This step is only relevant if your have specified price control V in the material master records of semifinished products or finished products.
    In this step you specify how the receipts for materials with price control V are valuated.
    When the master record of a material specifies price control V, the value for the credit is determined using a valuation variant. You must define this valuation variant separately for each valuation area. The valuation variant determines which material price is used for the credit posting.
    For materials with price control S, on the other hand, the credit posting is always made at standard price.
    If you deliver to stock at a price that is not the standard price, the system will report an output price variance in variance calculation.
    Requirements
    You must already have processed the step Define valuation variant.
    Actions
    If you have materials with price control V, you must specify for the valuation area which valulation variant should be used at the time of the goods receipt. Specify the goods receipt valuation for your material with price control V in this step.
    =================================================================

  • Direct and Indirect

    Hi:
    can someone tell me whats the difference between direct and Indirect reports in SRM-BW.
    whats the functionality of them.
    how to figure out them
    where to find them, any T-codes, tables will of great help.
    it would be great if some one can tell the relation between R/3 PO and a SRM PO
    Thanks
    kedar

    Hi,
    If I understood Your question about direct and indirect reporting in SRM-BW.
    Direct reporting it is a SAP RemoteCube in BW. RemoteCube is and InfoProvider. This is a special RemoteCube that allows You to define queries with direct access to transaction data in other SAP systems. RemoteCubes are defined on the basis on an InfoSource with flexible updating, and assume the characteriscics and key figures of the InfoSource.
    Indirect reporting is like standard BW reporting with master data, transactional data, attributes and hierarchies.
    All BI content You may find in transaction RSA6 on SRM side.
    There is not many difference between SRM and R/3 PO's. On both side you may create PO from SC, PO with direct or indirect material etc.
    Please look into service.sap.com/instguides -> SRM -> Plan-Driven Procurement and Self-Service Procurement
    Regards,
    Marcin

  • Org. unit and associated material groups download from Org. structure

    Hi,
    I want to download the material groups and associated material groups(Defined in External attributes) from organisation structure.
    Please suggest how to do it.
    Best regards,
    Sambit

    Hi. There's a point. You said you wanted to download a list so I presumed you wanted all the org units and all the material groups assigned to them.
    If you only want to do it 1 org unit at a time the function will work perfectly.
    I f you do want to see all I have had another thought actually.
    You could run program RHOMATTRIBUTES_REPLACE.
    This allows you to replace 1 attribute with another, but if you do not press the "change" button it works as a good report on attributes.
    If you just put in attibute PRCAT and then Old Value = Logical System of backend and New Value = Logical system of backend and tick substring then execute, it will show you all the org units and all the material groups.
    Just be careful not to press the replace button on the output, that would actually change data.
    Regards,
    Dave.

  • Regarding list with material no and material class per product

    Hi All,
    Could you please tell me ,Is it possible to create a list with material no. and which material class is linked to each product?
    E.g.  7510555 (plant DK10 - sales org. DK01) Class type Z01 - ESTORE and SATTSTORE + class type 001 - CHEMICAL PRODUCT and DK_FD_SALG.
    Can you inform me in which table I can find the information.
    thanks in advanse!
    With regards,
    Pritee.

    Try transaction CL30N, CL31, CT10, CT12.
    Best Regards, Dirk

  • Material,PONumber and SP for sales order

    Hi Every one,
    Please help me in explaining in details how to create(assign) material, Purchase number and sold to party and ship to party to create sales order.
    You guys have been very helpful to me .
    Thanks in advance.
    VM

    Dear,
    You can create material master - MM01, change material - MM02 and display material - MM03.
    You can create Customer master(Sold to parth, Ship to party) - XD01, change cusotmer - XD02, and display customer - XD03.
    You can create sales order with VA01, change - Va02 and display - Va03.
    Sequence is.
    First create material,
    than customer,
    quatation,
    inquiery,
    sales order.
    Regards,
    Mahesh Wagh.

  • Material ledger tick in material master

    hi
    i have created material master Number ABC.
    Make changes in material type and activated material ledger. Now ML tick is on all new material master being created its fine.
    Question is how I can activate the ML tick on material number ABC which created before activation of material ledger.
    regards

    Hi,
    no, It's not a big mistake and it can be solved quickly be SAP Support.
    But you can try the following workaround:
    1. You can change the material type of the material to a material type managed by value and quantity (txn MMAM).
    2. Afterwards, change the customizing of the material type in OMS2 (I assume you've done this already).
    3. Finally, you reset the material type again in txn MMAM.
    If this does not work or if too many materials are affected, there is no  other way than contacting SAP Support.
    BR,
    Antje

  • How to use the direct material indicator in Plan Driven Procurement?

    Dear Experts,
    How the system determine the procurement as direct material procurement in Plan driven scenario? In case of manual shopping cart, the system determines the direct material /indirect material procurement based on the check box 'Order as direct material'
    indicator.
    Now in case of plan driven procurement, where the requisition comes from ECC system, there is no way to indicate in the MM system for direct material?
    Could you please enlighten me here?
    Thanks and regards,
    Ranjan

    Hi Ranjan,
    In case of manual shopping cart, system at that point does not know whether the material procured has inventory management maintained or material valuation. Hence we need to specify option of 'Order as direct material'.
    But when requisition is created in ECC system, SAP system already is aware of direct procurement since material used will have material master / Inventory management / Material valuation / Storage location etc maintained. And the info or some indicator will be sent to front end SRM system accordingly. 
    Moreover it does not really matter for front-end SRM system to check whether it's a direct or indirect procurement since all procurement processes followed in SRM will be exactly same.
    Hope this provides some kind of understanding for your questions.
    -Ravi

  • Info on Service procurement and Material procurement in Purchasing

    hi
    we are dealing with a purchase register for services report and a purchase register for material report.
    Can anyone explain in detail about material procurement and service procurement in MM  and
    what are all the documents created/ involved in the flow and explain the relationships between these documents ( between PO & GRN&INVOICE  like  i,e 1:m or 1:1)?
    1. PURCHASING - MATERIAL PROCUREMENT
           PO->GRN->INVOICE.
    2.PURCHASING - SERVICE PROCUREMENT
    PO->_?_-> INVOICE.
    And differences between material and service procurement.

    Hi,
    Material POs.
    One PO, Item can have many GRN Items.
    One GRN Item can have multiple Invoice items.
    This is same for services as well.
    In Services, the equivalent of GRN is acceptance of the service entry sheets.
    Thanks,
    Krishnan

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