I had doubts about calculating the moving average price in SAP MM whenever I used it to create an order. Most of the time, we are not aware of the previous PO price and quantity, or the calculation of the price went wrong, and hence we fail to get the exact result of MAP for any material. It is very simple and can be calculated in just a minute. It is a simple formula. We just have to keep in mind the price and the quantity of the previous and current PO. That's all. Here we go.
Moving average price SAP MM
The moving average price in SAP MM is easy to calculate | Image credit to SAP blogs
The moving average price itself says the price variation after every purchase order is placed. The price of the order can be taken from three different sources. The first one is from the Purchase info record, the second, the vendor price, and the third, the outline agreement. This is also called the source of supply, as we can get to know who can supply the materials.
How do I figure out the price as a purchase officer? You can take an example with the previous PO and the current PO. When I created the first order for the particular vendor, at that time, the price was considered $10 and the order was placed for qty 20, hence the total = 200.
The moving average price for my upcoming order would therefore be
Previous Price + Total GR Price (current)/Previous qty + Total GR Qty (current)
Eg: previous price ($10) current price ($11) and previous & current qty (20) and the current total GR price ($220) It comes to around $10.47
If you have any other thoughts or procedures better than this, please mention them in the comments. I will add to this article as well.
The process of subcontracting in SAP MM is a process of win-win situation for both the vendors and manufacturers. First, we need to know who is customer, vendor, and manufacturer here, in this process. It is an elementary term, however, some bit difference in its definition when you compare contract and subcontract. Therefore, when you create a purchase order, you need to put or select item category as “L” (subcontract) and create Material as finish product, FART and add its components.
Further, with the vendor, you have a subcontract in such a way that you will place the order with additional raw components to get your end product. You are the only responsible for the final product. For an example, if you run a bakery shop, you produce breads, buns, toasts, and the order baked products like cookies etc… but you do not produce cakes. However, you also sell it in your shop. Therefore, to get the cake, what you will do? Obviously, you will outsource the cakes.
Furthermore, you will find the best vendor to procure cake. However, you will also provide all the required raw material to produce it. This is called as SAP MM subcontracting. Here you simply will place the order as item category “L” and add components to this material.
When you place the order, you must have material as cake and its components. Therefore, along with order to be raised, an item category as L. Now you must be thinking that how these raw materials will get delivered to the vendor to get the cakes in your shop?
you will also provide all the required raw material to produce it. This is called as SAP MM subcontracting. Here you simply will place the order as item category “L” and add components to this material
Follow the below process to order cakes in subcontracting SAP MM.
1. Create material cake with material type as FERT (finish product), valuation class should be related to finished goods, and keep the other details like regular material creation.
2. Create materials as ROH “Raw Materials” for example, things which requires to cook the cakes. e.g., flour, sugar, honey, sweeteners, colour, soda, baking powers, etc.
3. Create PO (purchase order) with material as finish product (FERT) as cake using item category L (for subcontracting) and add BOM (bill of materials) as components.
4. Go to material tab and right extreme, choose or tick “component” tab, add your raw materials as requested by the vendor to create cakes as per the advised quantity and saved the order.
Now you have created the order, and how will you send raw material to the vendor in subcontracting SAP MM?
There are two ways of doing it. We have to do transfer posting. One in Migo and the order way is subcontracting stock per vendor, using the transaction ME20
Once you have issued the material, after 5 days you will receive the cakes. Thus, here you will goods receipt against the order in Migo along with you will have also option to receipt of raw material. Furthermore, keep all tick and save. Now then, it's time to check your stock level, go to MMBE and check the stock for material Cakes, you will see material inventory should be up with the qty you have ordered in the store.
You may also like to read the best way of Sending RFQ (Request for quote) to Desire Vendors in SAP using ME57
