External Services Management (MM-SRV) This section provides a general introduction to MM External Services Management.

It provides an overview of the functionality, shows how MM External Services Management is integrated into the Purchasing application within the Materials Management module, and indicates the interfaces to other applications.

Purpose

MM External Services Management (MM SRV) is an application component within the Materials Management (MM) module. It supports the complete cycle of bid invitation, award/order placement phase, and acceptance of services, as well as the invoice verification process.

Features

MM External Services Management provides a basic process for the procurement of externally performed services. This basic process comprises the following functionality:

Service master records, in which descriptions of all services that may need to be procured can be stored. In addition, a standard service catalog and model service specifications are available.

A separate set of service specifications can be created for each concrete procurement project in the desired document (e.g. PM maintenance plan or maintenance order; PS network; MM purchase requisition, RFQ, contract, purchase order, or service entry sheet).

o Service specifications can include items representing materials in addition to those representing services or activities.

o When creating voluminous sets of service specifications, you need not laboriously enter each individual service manually. Instead, you can make use of the referencing technique and the selection function to copy quickly and simply from existing master data and documents.

MM External Services Management offers two basic ways of specifying services:

o As planned services with description, quantity, and price.

By "planned services" we mean services whose nature and scope is known to you at the start of a procurement project or transaction.

At the time the services are requested, the individual specifications are entered either with the aid of a service master record or directly as short and long texts. Price and quantity are specified in both cases.

o As unplanned services with the setting of a value limit only.

By unplanned services, we mean services that cannot be specified in detail because their precise nature and scope are not initially known, or services which - for various reasons - you do not wish to plan. Unplanned services therefore have no descriptions.

They are entered in the form of monetary limits. Services may be performed up to a value not exceeding these value limits. This allows you to exercise a degree of cost control in such situations.

You can analyze data already available in the system in order to find suitable sources of supply for certain services.

You can also carry out a bid invitation process and evaluate the bids submitted in response using the price comparison list function. You can then award a contract to (or place an order with) the desired vendor.

During the phase of service performance (execution of work), various lists and totals displays enable you to retain an up-to-date overview of your service specifications, the progress of the work, and the costs being incurred.

You can record the performance of services or work in service entry sheets.

You can indicate your acceptance of the work set out in the entry sheets in various ways.

Following acceptance, the vendor’s invoice can be verified and released for payment.

As an alternative to this basic process, various accelerated and simplified processes are made available to you for use if desired in connection with specific procurement transactions.

Integration

MM External Services Management is completely integrated into the Materials Management system. The master data for the procurement of services can be stored in service master records, for example, which subsequently provide default data for the purchasing documents. Service specifications for a concrete procurement project are not created and processed separately each time (e.g. as bid invitation or contract specifications), but entered directly in the purchasing documents (e.g. in a request for quotation, quotation, purchase order or contract).

The following graphic demonstrates the degree of integration of MM External Services Management:

The External Services Management component is linked to the SAP modules PM Plant Maintenance and PS Project System. As a result, it is possible to create purchase requisitions for external services within the framework of maintenance measures or a project and then transmit them to Purchasing without incurring additional data maintenance work.

The interaction of the R/3 modules MM, PS and PM, CO and FI saves time and effort and reduces the frequency of errors. This is because data need be entered once only, after which it is available for all follow-on activities within a business process.

An example of the integration of MM and CO is purchase order commitments. The expected value of unplanned services is forwarded to CO from within MM so that a commitment figure can be established and monitored. This enables the relevant budget for procurement measures to be prepared in good time.

MM - EXTERNAL SERVICES MANAGEMENTSTEPS IN THE PROCUREMENT OF SERVICES

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The procurement of services may involve the following phases: Creation of purchase requisition Determination of possible sources Invitation to potential service providers to submit bids (creation of RFQ) Entry of quotations (bids) Analysis and evaluation of quotations Award of contract (order placement) Entry of services actually performed Acceptance of services performed Checking and approving invoices submitted by vendors for services performed

The following sections describe these steps in more detail:

Creating a purchase requisition A purchase requisition is created in order to inform Purchasing that a certain service ist needed. You can specify which consumption account is to be charged. It is thus possible to make provision in the requisition for the costs of procurement to be assigned to a certain cost center or a sales order, for example (by specifying the relevant account assignment category). You can enter the account assignment category in the requisition or in the purchase order.

Determining possible sources If a possible source exists for the procurement of a certain service, you can

· have the system automatically find the source and assign the requisition to it, or · choose the desired source from a list generated by the system

You can adopt a potential source of a service suggested by the system, but you are not obliged to.

Source determination in the system When determining possible sources of a requested service, the system refers to the following information in the sequence shown:

1. Vendor service conditionsThe system first checks whether master conditions whose validity period covers the delivery date shown in the requisition exist for the service

If master conditions exist for one or more vendors, the system suggests this vendor as the source. The prices and conditions of the relevant master conditions are then suggested when you create a purchase order with reference to the assigned requisition.

2. ContractsIf contracts relating to either the material group or the service shown in the requisition exist, the system suggests these contracts as sources.

If a requisition has been assigned to a contract, the system can generate release orders against it.

Via the Customizing facility in Purchasing, you can define how the sources for services are to be determined. For example, you can specify that a contract is suggested as a source if it contains at least one service from the requisition. However, you can also specify that a contract is only to be suggested if it covers all the services set out in the requisition.

You can also enter the source of the services set out in a requisition directly. For example, with this function you can assign the requisition to a vendor from whom you have not yet procured any services to date.

Inviting bids (creating an RFQ) If a bid invitation process is to be initiated for services, you must set out the service

descriptions in a request for quotation (RFQ). In doing so, you can simplify and speed up the data entry process by using data from the service master record. "Planned" services can be entered with precise descriptions. Alternatively, it is equally possible to enter just a money value limit covering "unplanned" services. "Unplanned" services are services whose exact nature is not clear at the time of the bid invitation phase. Entering value limits to cover such cases ensures that cost control can still be maintained.

A bid invitation may involve planned services only, unplanned services only, or some combination of both. The RFQ is entered only once, and can then be assigned to any number of potential bidders. The system creates a separate RFQ with a unique number for each bidder.

Entering quotations When a quotation is received from a bidder, the latter's prices and conditions are entered in the RFQ that already exists in the system. The status of this RFQ is then changed: the RFQ in fact becomes a quotation. In the SAP System, the RFQ and the quotation are effectively one and the same document.

Analysis and evaluation of quotations When all quotations have been received and entered, the most favorable one is determined using the price comparison list. Rejection letters can be sent to unsuccessful bidders.

Award of contract (order placement) The successful bidder can be sent a purchase order as a document of contractual nature for a once-only transaction. To minimize the time and effort expended in entering data, purchase orders (POs) can be created by referencing a quotation. If a longer-term cooperation with a vendor is planned, a contract with quantities and values can be set up. You can then release certain services against this longer-term contract on the desired dates by issuing release orders from time to time. You also have the option of storing prices for certain services. That is to say, you can use the contract as a price list.

Entering services actually performed You enter services that have actually been performed by means of service entry sheets. In doing so, you can reference the PO. This procedure is suitable for the entry of planned services. At the time of entry, each individual item of the entry sheet is recorded together with its actual value. Unplanned services can be precisely specified as individual items at the time they are entered as having been performed. They are recorded with their exact value and are checked with regard to adherence to the value limits specified in the PO. You can evaluate the quality and timeliness of the services provided by your vendors. Two semi-automatic criteria are available in MM Vendor Evaluation for this purpose.

Releasing (approving) the service entry sheet You can make service entry sheets subject to a release (approval) procedure. In the process, you can release each individual entry sheet (individual release) or several entry sheets at once (collective release). Assume an entry sheet to the value of $10,000 is subject to release strategy S3, in which three different points (individuals or departments) in your company must give their approval. The entry sheet counts as having been accepted when the third release point has released (approved) it. If a release procedure has been defined, an individual entry sheet cannot be directly manually accepted.

Accepting services performed In the next step, the services listed in the entry sheet as having been performed are accepted. The acceptance and entry of services can be defined as separate steps. However, it is also possible to have entry and acceptance carried out by the same individual or department.

Checking invoices for services The final phase of the service procurement cycle is verification that invoices submitted by vendors or subcontractors are correct. In the process, the highest-level value limit from the accepted entry sheet is taken and compared with the invoice. The taxes shown in the invoice are checked. If the value limit is exceeded, the system issues a warning message.

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This Site is Maintained by: Cory Hutchinson

Maintained until: 12/10/97Last update: 03/23/2004 17:25:02