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

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

Introduction to SAP Procurement Cycle (P2P)

The SAP Procurement Cycle, also known as the Procure-to-Pay (P2P) cycle, is a fundamental process in SAP MM (Materials Management) that covers the entire procurement workflow from identifying material requirements to vendor payment.

Overview of the P2P Process

  • Requirement identification by departments (e.g., production, HR)
  • Creation of Purchase Requisition (PR) as an internal document to request materials or services
  • Request for Quotation (RFQ) sent to multiple vendors
  • Vendor quotation maintenance and comparison
  • Vendor selection based on price, quality, and capacity
  • Creation of Purchase Order (PO) as a legal document
  • Goods Receipt (GR) upon delivery
  • Invoice Receipt and processing
  • Payment handled by the finance team

Key Steps in Detail

1. Purchase Requisition (PR)

  • Created by the purchasing department using transaction code ME51N
  • Includes material details, quantity, delivery date, plant, storage location, and purchasing group
  • Serves as an internal request to procure materials

2. Request for Quotation (RFQ)

  • Created with reference to PR using ME41
  • Sent to multiple vendors to obtain price and delivery terms
  • Vendors’ quotations are maintained using ME47

3. Vendor Selection and Price Comparison

  • Use ME49 to compare vendor quotations
  • Evaluate vendors based on price, quality, and supply capacity
  • Finalize vendors and update vendor info records accordingly

4. Purchase Order (PO) Creation

  • Created using ME21N
  • Contains detailed terms including quantity, price, delivery schedule, payment terms, and vendor details
  • Can be created referencing the PR for accuracy

5. Goods Receipt (GR)

  • Performed using MIGO transaction
  • Confirms receipt of goods against the PO
  • Stock is updated in the system with options for quality inspection or unrestricted use

6. Invoice Receipt

  • Processed using MIR0
  • Invoice details are matched against PO and GR
  • System validates invoice amount and blocks payment until verification

7. Purchase Order History and Tracking

  • Use ME23N to view PO status, goods receipt, and invoice details
  • Helps track order fulfillment and payment status

Important Notes

  • RFQ, quotation maintenance, and vendor selection are typically one-time activities per material/vendor
  • Subsequent procurements usually start directly from PR to PO
  • Invoice processing and payment are handled by the finance department, not procurement

Conclusion

Understanding the SAP P2P cycle is crucial for efficient procurement management. This video guides you through each step with SAP transaction codes and practical examples, enabling you to manage procurement processes effectively within SAP MM.


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