Complete SAP Procurement Cycle (P2P) Explained Step-by-Step

Hi everyone, welcome again on my channel. So today we will see our another next topic

uh from in this video series that is very important and uh backbone for SAP which is also known as SAP procurement

cycle or P2P cycle or procure to pay cycle. uh different names are there but in nutshell it is a very important topic

and if you understand P2P cycle then you can understand all the topic uh related to it as I discussed in last video as

well so let's try to understand this P2P cycle in detail in last video we try to understand complete overview of how

business process look at on high level. So this uh we saw in last video but now we will only focus in our area that is

SAP P2P or SAP MM or sourcing and procurement. So this is only our area for today to discuss in detail and to

understand again in this video also don't execute any transaction in system and just try to understand this

procurement cycle in MM uh do not run any transaction in system. This video is also just to understand P2P cycle and

you will see this same video again in fifth one fifth or sixth video. So what

happened in procurement? So as we saw in last uh while understanding detail business process uh overview for all

module together we understand that requirement is gen determined from either production or

sales. Then that require according to that requirement we determine the source of supply that is a vendor. Then once

supplier is decide we order him through a purchase order goods then we monitor and we get a

confirmation from vendor then he deliver goods and we do invoice and then payment processing happens. So we will again go

in detail in this video where we will see all the P2P cycle and uh why it is important in

detail. So let's try to understand in detail P2P cycle and note again don't execute any transaction just try to

understand in detail. So let's start. So as you know uh various department

works together to achieve some common goals of any organization or company. In order to fulfill that common goals they

need some services or materials. So let's say any department for example production department need

any raw material to produce any final product or HR need some

files or stationary and so on any department may have any requirement. So if any material

requirement arises that time they determine that particular department determine the material

requirement and they try to approach to the responsible department

who can buy this uh particular material or service. So they approach

to responsible department that is nothing but logistic or procurement. And to approach the uh that

material to procurement or logistic department in appropriate way they use internal document that we know as a

purchase requisition or purchasing requisition. So that's where purchase requisition came in picture. Purchasing

requisition is an internal document. Once purchase purchasing department receive requirement from uh

any other department then what purchasing department do in order to fulfill that

requirement material requirement or service requirement they required who can

provide that material. they start requesting or they find out who can give that

material with expected quality quantity and with cheap price. So what purchasing department do they ask for quotation

from various vendors or suppliers and which is nothing but your

RFQ and while requesting quotation purchasing department set some deadline in order to receive that

material or that quotations on time depending upon the urgency of material. or

service. After receiving the various quotation uh from various

vendors, purchasing purchasing department might ask them for a sample product in order to check quality and

then upon price and quality factor they finalize vendor but before that they maintain all the quotations

they received from vendors in their system or maybe in paperwork. work now don't think about SAP just

think about normal procedure that is P2P cycle don't relate it with to SAP now later on I will uh explain it so now

they maintained quotation after maintaining quotation one what purchasing department do so they have

various vendors they know who can deliver me with cheap price and expected quantity and quality so they decide

among all vendors that They have they select appropriate one vendor and they they

maintain other vendors as well in case if they need those vendors in future or if they are not happy or satisfied with

the quality and price quotation they reject those vendors. Now they have vendor, they know

material and they know all uh required criteria. What they do? They place purchase order. Purchase order is

nothing but the legal document that that they send to the vendor with quantity, quality and delivery date when they

want that particular material. So once PO is sent to vendor then according to the PO vendor will send the

material to the company or plant with material quantity and once they send that once

vendor send that goods or material from his premises and it reaches to the company premises or storage location

then company responsible p person will perform goods received means he have received that goods that they

requested from vendor. Goods received is all about stock and material. Once goods received

is done then they proceed with invoice receipt. So invoice receipt

is relevant to the all financial terms. In this they mention terms then how much your payment is due to vendor

then what are what are taxes included in it and all details. So now once invoice receipt is

done then invoice processing and vendor payments is

performed. But note that here invoice processing and vendor payments is not part of procurement team

or logistic team. It's handled by finance team. Note that here these three RFQ then

maintain quotation and deciding vendor this is one time activity. So once for any particular material you know

specific vendors you have decided specific vendors then you will not perform this activity again and again.

So what you will do next time what you will once you get requirement and purchase request you will directly

perform purchase order. You will not do this again and again. This is only one-time

activity. So this complete cycle starting from requirement till invoice received is nothing but procure to pay

cycle or P2P cycle and all SAP MM and rest of processes around this cycle is nothing but complete

MM. So what all those possible processes around this cycle? We will I will just give you glimpse not all processes but

let's say when you try to decide the requirements so you create material master data if it's in

HANA then you have to perform activity of material ledger as well. Then after purchasing requisition you

have to select on purchase requisition approval. Then various document type let's say this purchase requisition is

for uh subcontracting then pipeline or standard purchasing. So depend depending uh upon

request you will decide uh what document type this PR should select. Then once you request for

quotation so you get vendor data and accordingly you maintain vendor their background settings number

ranges then once you have you have decided on vendors then before performing your purchase order you have

to maintain various master data again then tolerance limit tax conditions then pricing procedure before

performing PO then printing of those POS workflow then in case you have any contract or

agreement with that vendor then you have to maintain that as well then approving those purchase

requisitions then different pro business process design let's say stock transfer order or special procurement scenario

like shale pipe rebate all that then posting period variant before performing your goods received. Then once you have

goods received, so you have stock, then you have to decide on uh your goods movements. Then according to your stock,

you perform your MRP that is that is material requirement planning. Then you have to manage inventory. So it comes

all together inventory management. I already told you this is only one time activity. So this is first part. But

once you have everything then it's a second path. We have seen SAP P2P cycle normally. So now we will relate this

cycle in SAP. So I will show you this complete cycle in SAP. How we will create all these things in

SAP. But before that we require some prerequisite data like material, vendor, plant, company that I have

already created and we will use same for practice uh for this P2P cycle. So I will use this

material. So let's say we have requirement of this material and we want

to create purchase requisition. So what is T code for purchase requisition that is

ME51N and always note that in SAP at least in SAP MM there are there is always T codes are in sequence. So if uh

ME51N is to create purchase requisition then ME 52N is to edit purchase requisition ME 53N is to display

purchase requisition and so on. So I will create purchase requisition in SAP run code ME 51 N and press enter.

Once you run ME51N you see this basic three tabs here. So header data item overview and

item. So we will see one by one. So hra data you can just put any note here let's say

test P2P or anything or even you won't put anything it won't matter this is again

important one from here we will say purchase requisition we will select here then item overview tab is most important

tab here we put most of data in case of purchase requisition so I will put here material material that I have created.

Then how much quantity I might require depending upon the uh requirement determination. So I will put 10 here for

test. Then unit of measure for that uh particular material. Then when I wanted this

material so I will select appropriate date. Let's say I want this by 1st of December. Then what is a material group

for this material? Then under which plant I want this

material. Then under which storage location I want this material. Then who is responsible person

that is purchasing group. Then who is requisitioner? So who is requesting this material? He can put

his SAP user ID or name depending upon the configuration of the system. So I will put here just

test then any tracking number then if you know any vendor that is desired vendor or if you know any fixed vendor

then you can put that if you are creating this PR for second time if you already

have vendor mean this path but if you don't know vendors then you are not going to put these two fields

Then supplying plant. So in this case it's not there. Then for which purchasing organization you are creating

this. Then agreement in case of any agreement is there. So we don't have anything. So that's it. Once you provide

all this data just click here on check. So system will check if everything is all right. I will select

appropriate plant and storage here. Your system might not ask this. So see there is no error in this.

But note that once you provided all data this new tab will appear here. It will give you more detail about this item.

Also note that this one item 10 is for one material. You can put as you as many as you want materials here but for test

I will put only one. Then we will see different tabs here in item tab. So material

data. So from system uh material master data it will retry all detail about that material. So in

this tab then quantities and date. So how much quantity we want at what date at what date we are

requesting then how much time uh is uh plan delivery time then GR processing time we can put

that even though we won't put it won't matter at all then valuation tab so what is the

price of this per piece then what is the total price and all that here Then here goods

received, invoice received are required or not that we can decide here. Then source of supply in case we have any

vendor or if we have info record for this so we can maintain that we will see info record and all that details later

on. Then if that material have any other order unit so we can put then status. So here for now once we create this PR then

we can check this status then who is contact person so we can put but here I have just put test here then any

additional text or note we want to put we can put here for that material let's say just I will put test

P2P PR then what is the delivery address so it picks by default plant address But in

case there is different delivery address you can change that. Then save this purchase

requisition. So once you save this purchase requisition system will give you here purchase requisition

number. You can double click it on it and you can see that. So I will save this purchase requisition number for our

future preference cuz it's required. So here I have created PR. Once I have

PR, what is next? I will request quotations to different vendors according to that

requirement. So I will use code ME41 for requesting quotation. So let's see the same in SAP system.

So here so here I will run decode ME41. You can go by path as well but I'm covering

only it with decodes. So once you run ME41 you will see this initial screen to create RFQ that is request for

quotation. So by which date you want these quotations from vendor. So you can put that. So let's say I wanted it by

30. Then for which purchasing organization you want it. You can put it or you may leave it blank. Not an

issue. Then for which plant storage location all detail you can fill if you want. If not then you can directly go

ahead. But best way is to always create RFQ with reference to the purchase requisition. This way also you can

create or just provide all required details here and press enter. This way also you can create but here I will

create purchase uh RFQ with reference to the purchase requisition. So click here reference to purchase requisition. Then

it will ask you the PR number that I have. So I have this PR number. I will use

it. Just provide that PR number here. And if you have more than one material so you have to provide

specific item number but in my case there is only one item line so I will provide only one. You can provide plant

and all that but it's not necessary as in PR everything is maintained. So once you provide PR number just press enter

or click here. So what system will do? System will retrive all details that maintain in that purchase requisition

and it will show you this screen. So here you can see all details from that

PR. Then select this PR and click on adopt plus details. So system will give you this

screen how much quantity one bag or 10 each. That material have two different unit that's why it shows

that then press enter. Yeah. So here you see this screen then you have to send uh these quotations to

different vendors. So how you can do? Select this line and here you can see supplier address.

So click on it. Once you click you can see this details. So in this case now I will select various supplier that I have

already maintained. Put that here and press enter. So system will retry all details

of that vendor. So this is the one vendor for P2P. Press enter and save

it. As soon as you save it system will send system will create quotation number. So here you can see RFQ number.

This is RFQ number. So system has generated one RFQ

number. And depending on the communication way with communication media with that vendor, you can either

send that email or print to that vendor according to the media through which you contact that vendor.

Then this is done for one vendor but I have to send this uh to many vendors. So I will do nothing. I will just print in

the same screen another I will just paste another vendor in the same screen. Vendor two for P2P and I will

just save. So system will generate another RFP number for the same material detail that

is 02. I will maintain that as well for my future reference cuz I need that and the

another vendor is 12. So this is three vendor for P2P and I will save it. So system will generate

third RFQ number that is here. So I will maintain that as well for my reference. Once we have created RFQ

then so once we have sent quotation then we will maintain those quotation in system and to maintain the quotations we

have tip 47. So now we have sent quotation and similar

way if you send created uh uh requested quotations using ME41. So you can edit it using ME42 and display using ME43.

Same way now we will maintain quotations. So let's see how to maintain quotations in system with decode ME

47. So I will run decode ME47. So maintain quotation screen here. So what we will do? We will use that

quotations that we have maintained one by one. So this is first quotation for which let's say vendor has

given us price. Just provide quotation go in this screen and here you can see you can

maintain here net price for that particular RFP. So I will consider here this vendor giving me price of

let's say 10. Just press

enter and save this quotation. So see quotation is maintained. Similar way I will maintain for second

quotation. Let's say for this this vendor is giving me price of 10.20. Again press enter and

save. This format must be with comma. So point system is different for this. maintain this

quotation and save it. Then similar way I will save for third

vendor third quotation. So for this I will maintain price let's say

11 as per the vendors quotation or let's say 9 9

50 and save it. So what we did now we have maintain RFQ that is our this stage. So once we have vendors,

we got their quotations. Now we will decide among these vendors which one is appropriate for us depending upon the

quantity that he can provide us as per our requirement. Let's say I want 1,000 material per month. So does that vendor

have that much capacity? He can supply 1,000 materials per month. Then the expected quality whether this vendor

providing me the material as per my require required quality and then third third criteria is

price. So how to decide that vendors? So let's see how we can decide. So there is decode m49 for price comparison. So we

will see that in system with decode m. So I will run here decode ME49. So here it's price

comparison. So here we can put our purchasing organization then quotation from which quotations to which

quotation range here or in case let's say I have quotations but those are not in

sequence in that case I can click here and I can put my all quotations here those are not in sequence.

sequence and just execute. But in my case, all quotations are in sequence. So I will not use this. I will just put

sequence there. So my quotations are from 0 1 2 3 and just execute

it. So system will compare price and it will give you suggestion as per the price which vendor is good. So

see third vendor given me price 950 and it is on first priority. So it got to rank one that is

96%. This vendor is on he giving me to 10. So he got second rank then third vendor giving me to 1020 and he got

third rank. Then system shows percentage of all this. So how system calculate percent system take a summation of this

and divide by number of vendors and system shows percentage. So once you got this then you just click on

vendor. So system will give you this screen. Here you can maintain details about vendor. So if you are not happy

with this vendor you can reject it. If you want to finalize this vendor, in that case you have

to select this vendor here in info update. So what you do update this vendor with plant without

plant. So here I will select update with or without plant both options and tick. So I have selected this vendor. I

haven't rejected and save it. Okay. Then what about second vendor? I will keep this vendor also and

I will save it. But let's say I'm not happy with this vendor. So what I will do? I will

reject this vendor and save it. Okay. So now I got vendor. I have this vendor

finalized. Okay. So so far I have material requirement. I got

vendors their price material. So now I got everything. I have vendor material. So I want to

request them that material. So I will ask them to give me that material on particular

date. So I will create purchase order for them. And to create a purchase order there is a decode emit

21N. So let's see how to use this in SAP system. So run code here. ME21N. Once you run ME21N, you will see

the similar screen like PR, header, item over here and item. So we will go in this first you you will see all

this tab but only first time. This is the important organization data tab. So which per for which purchasing

organization I am creating this? What is a purchasing group and what is a company for which

I'm creating this purchase order. Then who is responsible vendor? So I have selected this

vendor. Then for which material I want to create this purchase order. So I have this

material. So I will provide this. Then how much quantity I want. Then by which date I want this

material. Then what is the net price of this material? So let's say 950 or whatever as per your

quotation. Then what is material group? Then plant for which plant I want

this material. Then for which storage location or instead of providing all these you can directly provide

just purchase requisition number here. So I will directly provide only PR number

here or there is alternative also available for this. You can click on document

overview. Okay. So instead of providing all details you just can click on document

overview and here click here and you can select here my purchase

requisition and you can directly click on this and it will appear here but as I already

provided here it's showing it here or you can directly select and copy it. So it will appear

here. So we will see that later on. But for now just provide your purchase requisition here and it will copy all

data. Okay. Then we will see one by one all tabs. So in similar way as I told you in

PR you can create purchase requisition also for more than one material. So here this

line item is for one material. If you have more materials you can provide details here in second

tab and so on. So we'll see one by one tab. Then here first tab in header that is invoice payment term. So when we

going to give vendor payment so all invoice related terms are here then condition it's all about price how price

get all calculated what are discount there then text in case there are any text specific text so it will appear

here or we can put here then what is the address so this is the address of vendor then communication

So you can put who is responsible person or uh his contact details or reference. Then in case of partner so we

will see partner function later on. There is different video available on partner function. Then collective number

then data we have already seen then status. So here we can see the detail of this purchase order as and

when we proceed further. So let's say I maintained this PO and I I done its goods delivery. So this will get

completed everything. But for now it's just in creation state. So it will not shows the details here. Then in code

terms in case of its external uh I mean foreign vendor then this tab we have already

seen. Then we will see the detail item details. And remember that as I told you you can maintain as many as material you

want here. And for each tab you have to see details. You can see here. So let's say if we we have two material it will

show me another tab here. But for now it has only one. So for this tab it will show all details here. If there are two

tab then you have to select again different tab and it will show you details here. So let's see all these

details. So first one is material data tab. In this you will see all detail about

material. Then second is quantities and weight. So how much quantity we going to order and if it has certain weight,

volume. So all that we can maintain here. Then delivery schedule all about delivery when we want delivery and all

details here. What is purchase requisition associated with this purchase

order? Then delivery. So is there any delivery tolerance allowed or not? Is special uh shipping instruction or where

we going to put this stock once it received and what about the vendors before goods receiving. So we can put

all that. What is plan and goods JR processing time so that we can maintain here and this is all about

invoice. So how we want to proceed invoice if any tax is associated with this so we can maintain that that tax

here and all details then condition is all about price for this one item and in header we see uh conditions for all

items together. So if we have more than one item then the header conditions will show info for all items means complete

pure. The similar way the text so we can maintain text here and it will appear text according to the

uh documents that we maintained previously. Then what is the delivery address? It's mostly plan but we can

change it. Then confirmation it will get activated once we save. Then condition control it's not important. Then retail

only in case of retail. Then what other tabs we have that's inco terms these are not

important. So this is how all tabs we have seen. Then click on check. So there is no any potential

error. They all are warnings. So it's okay. password. I will save this

PO. So system will give you PO number. Just copy that P number for future reference and I will maintain

that as well. So now we have PO as well. What is

next? So we done purchase order. Next is goods received. So let's consider that we we send PO to vendor and after few

days that vendor sent us that requested goods. So to perform goods receipt there is D code MIG. So let's see how to

perform goods receipt in actual system. So go to system and run tc code mi go. Press

enter. So this is the screen of goods received. So you will see all tabs here.

So most important what we are going to do. So this code contains various uh activities like cancelling or issue

goods or received or various movements of goods. But in our case we will perform goods received. So select here

goods received always check it what activity you are doing then with reference to what we are doing goods

received. So inbound outbound order reservation or scheduleuling agreement whatever. So according to that we have

to select appropriate document. So now we are doing goods with respect to purchase order too. So I will select

here purchase order. Then here provide that purchase order number that I have already copied. Then

it's item number as I told you if there are more than one items available so we can put

that. But in my case only one item available so I will not put or even though I will put only one. Then this is

most important here goods received movements. So if you are doing GR then it should be

101 but in case you are performing any other activity so these movements get changed according to the activity that

we are performing but for doing G goods received I will keep it 101 then document date then posting

date. So once I have provided all this just execute or press enter. So system will show me the detail

from that PO for this particular thing. So here I can maintain notes if there is any

note. It's not mandatory but it's always good to maintain it. Then here I can see vendor detail as well.

So then once I provided P number this is most important tab here. So we will see all one by one. So material here you can

see all material relevant detail. Then we have quantity. In this we can change the quantity that we are

receiving. So I have ordered let's say 10 quantity but I received only let's say five quantity. So I can maintain

five here and also you can put how much quantity you received or delivery note

quantity. So five then eight. Okay. Or let's say I will six six here.

Okay. Six back. Okay. Okay. And then where I want to

place this that quantity in case I haven't provided storage location so I can put that here. If there is any

unspecific unloading point I I can put there or any specific test text I can put there. It also show shows you in

which bin it will go and all the also this is very important while doing gr where I want to put this stock for

quality inspection or I want to put in block stock. So no one can use it until and unless its quality get verified or I

want to put in unrestricted. So we can directly use it as in when we want. So we can put that here. For now I will put

it it in unrestricted you. So this is again important one and here we can see purchase order related data and in case

this has any partner so we can see vendor related data. So once you verified everything just click on item.

Okay, for line one, if this GR has more than one line, then you have to click item. Okay, for each line after

verifying all this data. So now I'm doing this GR for six quantity. Okay, so item.

Okay, once you do okay, just press enter. So this stick will appear here and check

if everything is okay. So system giving me that four bags not received as we selected six only out

of 10. Then everything is okay. Then either click on post or save. So once you save this system will give

you this number that is GR number. So you can save that but if I it it's not necessary to have we can

retrieve it from PO that we will see soon. Then once I have done GR next is invoice

receipt and to perform invoice receipt there is T code MIR O. So let's see how to perform invoice receipt in system.

So we will run t- code m i r o. Once you run tc code system sometime ask you the company

code that is which you want to perform that goods receive. Then provide here invoice date. So maybe

today's date. Then reference. So you can put in reference your name or whatever as per

your company policy I will put P number. Then here it is most important tab these

two tabs. So out of this this is pure reference is more important once you go in pure reference

here you will select against what document you want to perform invoice receipt. So in my case I will select

purchase order also before performing all here this tab is very important from this you

can select invoice credit memo subsequent debit and credit accordingly we select that but for now I'm

performing invoice so it should be invoice then go further then it should be on pure

reference many times we click here and we think like I'm not seeing in this all tab here. So always remember to click on

PO reference. Then provide here PO number. In case that PO has more than one items, provide that item

number. Then again here this is again important tab. So we see all three tabs. So what it means goods and service item

means system will only consider this invoice for goods cost not his delivery cost. In case that

item has different delivery and tax cost, system will not consider and system will do only this invoice with

reference to the goods cost. If you select second option, system will perform invoice only

the plant delivery cost and not goods cost. And if you select third, then system will perform this invoice against

goods and delivery cost. So select third here. So system will calculate everything. Once I have provided all

details click here on calculate tax. So in case this PO has any text system will calculate that as

well. So see system has retrived all details here. Then check this all

tabs what payment detail tax whatever you have. So you can cross check it in case you have anything extra tax here or

any particular note is there or you want to put any note. So you can put that again go to basic

data. Here you are seeing balance. So it is 57. So what you have to do? Copy that balance and don't copy this negative

sign as it's showing in negative. Just copy balance and paste here in amount. Once you provided that just

press enter. So it will turn into green. So once it turn into green it mean you can perform this invoice. If

you put wrong cost system will not allow you to proceed further. Let's say I have put 58

here. So see balance system is showing one. So it's not appropriate. So it should be zero. Always balance should be

zero. Then save this invoice. So system will generate invoice but it's block for

payment. So you can unblock but this is how we perform P2P cycle. And once you done your invoice

then this invoice will process to the in finance area as I told you and again we can perform this

only once we have everything. Next time we will perform only via V second because we already have vendor.

So we will not perform this activity again and again. This is how P2P cycle works. Once invoice is done, we can

check the details about the purchase uh history in purchase order. And to check the purchase order history, we can run T

code M23N. Once we go in MA23 and you will see this screen here. I have uh created this PO

recently that's why I can see this P. But if there is different PO so you can open new PO just click

here and provide the appropriate P number and press enter. So you can see that PO in our case it is similar. So

you will see the similar one. Then go into header and status tab. In status tab you can see we ordered 10

quantities. We have delivered so far six quantity. Still to deliver is four. We have done invoice for six

quantities. Same way we can check in purchase order history tab in item about the goods receipt. Goods

receipt number. We can click on that goods receipt number to check that good receipt number if you

want. Same way we can check for invoice as well and it shows all details. So this way we can track uh associated uh

goods received and invoices here in purchase order history tab. This tab appear only after performing at least

goods received. This is how we can check all details about purchase order history. So always remember there is

requirement according to that requirement we create requisition with that

requisition we find out vendors and request them for quotation then we compare their price and maintain those

quotation team then we decide those vendor according to the three criteria quality whether he can provide the

required quantity and price. Then once we have vendor, we give them purchase order and ask them to deliver good on

required date. Then once vendor sent us the goods, we make maintain that goods received and we take that stock in our

premises and against that uh goods received we perform invoice and then according to the payment terms financial

team or finance team process their payments. This is nothing but P2P cycle in

details. So thank you guys for watching. Don't forget to subscribe my channel. See you in the next video. Bye-bye.