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Preliminary procurement for projects using SAP PS in S/4HANA or SAP ECC

The SAP Project System (PS) module provides companies with a comprehensive solution for effective planning, control, and monitoring of projects. In project planning, a common question arises about how to initiate the procurement of critical components or assemblies (‘long lead items’) at an early stage. An effective method for this is pre-procurement for projects.

What is pre-procurement?

Pre-procurement is a process where the necessary materials for a project are procured in advance. Often, procurement of these materials is intended to start early due to long lead times, even before the construction—especially the bill of materials—of the end product is completed (keyword ‘growing bill of materials’). This can help companies avoid potential delays and bottlenecks during the project and minimize the lead time for the end product. Pre-procurement ensures that the required materials are available at the right time. However, in many cases, it happens that the materials procured in advance go back into the procurement process after the completion and approval of the bill of materials. Thanks to pre-planning within the pre-procurement process with SAP PS, this error can be easily avoided.

How does pre-procurement work with SAP PS?

To use the process, it must first be ensured that the corresponding material is correctly set up. A planning strategy must be chosen that allows the consumption of planned independent requirements with dependent requirements and reservations. Additionally, the material in question should be set up for individual demands to ensure correct offsetting within the project stock.

Bill of Materials Transfer

Once the materials are set up accordingly, the pre-procurement process can start. Other prerequisites include having a project and having the pre-procured material listed in the bill of materials for the end product. For the transfer of ‘long lead’ materials into the project to initiate procurement early, it is recommended to use the bill of materials transfer. With this transaction, bill of material positions—rather than the end product itself—can be transferred into the project. It is advisable to define a selection profile in advance, ensuring that the indicator for pre-requirements is activated. In the bill of materials transfer, the created profile is then selected. In the upper part of the entry screen, the operations of the project being considered are selected (e.g., using the project definition). In the lower part of the entry screen selection criteria for the BOM components are entered:

CN33 - Bill of Materials Transfer Entry Screen
CN33 - Bill of Materials Transfer Entry Screen

After executing the selection, the subsequent screen displays the selected bill of material positions on the left side and the operations of the project on the right side. Now, the materials to be pre-procured and the operation to which these materials should be assigned are marked. It is important in choosing the operation that it is assigned to the same PSP element as the operation to which the end product will later be attached. If two different PSP elements are used here, preliminary planning demand and secondary demand will not match, leading to a new procurement element.

Tip

The allocation of materials to activities can be automated by using reference locations. Reference locations are stored both in the respective bill of material position and in the corresponding network plan operation. It often makes sense to create a preliminary bill of material that initially includes only the known long lead items. If reference points are then assigned here, the allocation process occurs automatically.

The ‘Assign’ function is used to allocate the selected materials to the chosen activity:

CN33 - Bill of Materials Transfer: Allocation of Positions
CN33 - Bill of Materials Transfer: Allocation of Positions

Through the allocation, the selected bill of material positions are removed from the overview. Only positions that have not been assigned yet can be selected there. The ‘Results’ option allows checking and saving the entries. In the first column, the action to be performed by the system is visible. In this example, the material is added. The bill of materials transfer also recognizes and considers changes, such as a quantity change or the deletion of components from the bill of materials. Therefore, if changes are made to the bill of materials afterward, they can be transferred to the respective project through a renewed transfer.

Crucial for pre-procurement is that in the column ‘V – Pre-order,’ the indicator is active. If there is no checkmark, the transfer was executed with the wrong parameters.

CN33 Bill of Materials Transfer: Column 'V - Pre-order
CN33 Bill of Materials Transfer: Column 'V - Pre-order

By saving, the material is now attached to the project under the selected activity. A corresponding planned independent requirement is generated in the individual segment and considered in the next MRP run. In this example, a purchase requisition results from the MRP, initiating the procurement process.

CJ20N - Project Builder
CJ20N - Project Builder
MD04 Requirements/Stock List
MD04 Requirements/Stock List

Completion of the Construction Phase – Implications for Pre-Procured Material

While the procurement of the long lead item is already underway, the bill of materials for the end product is being finalized. Once the construction phase is completed, and the end product is released, it can be assigned to the project. As a result, for the end product in this example, a reservation and a planned order generated by MRP are obtained. Since the ‘long lead’ material used for preliminary procurement is part of the bill of materials for the end product, a dependent requirement is created for it during MRP due to the bill of materials explosion. The previously generated planned independent requirement is consumed by this ‘real’ demand:

MD04 - Requirements/Stock List (Settlement)
MD04 - Requirements/Stock List (Settlement)

This reconciliation of requirements applies equally in cases where the reservation for the pre-procured material is generated directly from the network activity instead of a production order. The example screenshots are from an SAP S/4HANA system (Release 2022), but the process works the same way in the ECC system.

Conclusion

By using an appropriate strategy group in the material master, procurement for critical components can be initiated early in the project. Thanks to the consumption of requirements, it is also ensured that procurement for the same material is not accidentally initiated again at a later stage.

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About the author
Maximilian Ulrich
Maximilian Ulrich
I studied business administration and work in the ERP Team Logistics. My focus is on the module of production planning.

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