All About Purchase Orders in SAP MM

All About Purchase Orders in SAP MM

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Purchase Order is required when we need to purchase materials/services from an external vendor for our company

Purchase Order is a part of Procure to Pay (P2P) cycle of SAP

Procure to Pay (P2P) cycle starts from Purchase Requisition (PR) and finish with payment to the vendor.

Below are the components of P2P Cycle

Purchase Requisition --> Purchase Order --> Good Receipt --> Invoice Receipt --> Vendor Payment

We will start with configuration of Purchase Order in this post.

Also we will have a look on different types of Purchase Orders, their goods receipt as well as respective invoice receipt.

1. What is Purchase Order in SAP

Purchase order in sap is a type of legal contract which binds the supplier to supply the described materials or services & purchaser to pay after receiving the described materials or services.

So purchase order should contain

  • A Vendor/Supplier.
  • Purchase Organization structure like -Who is the contact (Purchasing group/Purchasing organization etc).
  • Material details.
  • Delivery date.
  • Quantity
  • Price
  • Delivery cost
  • Taxes.
  • Delivery address

There are different types of purchase orders in SAP

  • Standard Purchase Order
  • Stock Transport Order (STO)
  • Consignment Purchase Order
  • Subcontracting Purchase Order

2. Standard Purchase Order

Standard purchase order specifies the materials being procured, their quantity, agreed price and delivery date.

Standard PO does not has and type of special purchasing like subcontracting or consignment purchasing where purchaser is not charged till they withdraw the materials for actual consumption.

Configuration of standard purchase order

2.1 Define Document Types for Standard Purchase Orders

Purchase Orders are managed as document types in SAP

Document types decides a lot of factors.

For our car business, we will use standard document type “NB” for standard purchase orders

SPRO –> Materials Management –> Purchasing –> Purchase Order –> Define Document Types for Purchase Orders

Picture : NB Document Type

Select “NB” and click on “Allowed Item Categories”

2.2 Item Category

Item category defines how the procurement of a material or service item is controlled.

For example – Item category determines the field selection or determines whether a goods receipt or invoice receipt is to follow.

There are below item categories available

  • Standard
  • Consignment
  • Subcontracting
  • Third-party
  • Stock transfer
  • Service
  • Material unknown
  • Material group
  • Text


Some Examples of Item category control
--> "Standard" Item Category requires goods receipts and invoice receipts.
--> In "Consignment" item category, invoice receipts are not allowed.
--> For item category "Subcontracting", components to be provided are presented on a screen.

We have selected three item categories which are allowed with our standard purchase order document type “NB”

Picture : Allowed Item Categories

Note : Item Categories can not be configured. These are maintained by SAP, therefore we cannot change them. However, we can change the “External Representation” of PO item categories in IMG.

2.3 Confirmations

Confirmations represents the notification from the vendor to the purchaser regarding the status of a purchase order.

Confirmation covers all types of communications sent by a vendor (external supplier) to the purchaser.

A vendor confirmation

  • Can be an order acknowledgment,
  • Can be a loading or transport confirmation
  • Can be a shipping notification.

Confirmations enable the purchaser to plan more exactly due to receipt of up-to-date information the expected delivery. from the vendor.

2.3.1 Define External Confirmation Categories

Extenal confirmation categories are sent by the vendor through EDI etc.

Example of confirmation categories sent by vendor

  • AB-Order Acknowledgment
  • CH-PO change
  • GW-Rough GR
  • LA-Inbound Delivery

2.3.2 Define Internal Confirmation Categories

In this step, an external confirmation category is assigned to each internal confirmation category.

This assignment is required for system to be able to recognize which confirmation category represents order acknowledgments and which one represents shipping notifications.

This is configured as per below screenshot

SPRO –> Materials Management –> Purchasing –> Confirmations –> Define Internal Confirmation Categories

Picture : Define Internal Confirmation Categories

Please note the different delivery types YEL – Inbound Delivery Customized for PPL

So if the vendor is sending confirmation of type “LA” then system will create an inbound delivery of delivery type “YEL”

Note : Please check the inbound delivery type configuration in detail HERE ELR – Inbound Delivery Intra. Enhanced Store Returns

Inbound Delivery Intra. Enhanced Store Returns will be created of delivery type “ELR” ECR – Inbound Delivery Cross Enhanced Store Returns

Inbound Delivery cross. Enhanced Store Returns will be created of delivery type “ECR” ELST – Inbound Delivery Stock in Transit

This delivery type is used with receiving valuated stock in transit. This delivery type uses an item category with movement type 109.

2.3.3 Set Up Confirmation Control

Confirmation control in the form of Confirmation control key for PO items can be defined with just one confirmation category (e.g. shipping notification) or a confirmation control key covering several confirmation categories (order acknowledgment, loading confirmation, shipping notification).

SPRO –> Materials Management –> Purchasing –> Purchase Order –> Confirmations –> Set Up Confirmation Control

Picture : Set Up Confirmation Control

Now select Confirmation control key “0004” and click on confirmation sequence.

Picture : Conf. control key 0004 configuration
So as per above configuration, if we assign confirmation control key "0004" in our PO item, we must create inbound delivery to do the goods receipt instead of MIGO.

2.4 Create Standard Purchase Order

We will create a standard purchase order now

Start ME21N

2.4.1 PO Header

First fill the PO header fields as shown in the below screenshot

  • Purchasing Document Type – NB (Standard)
  • Vendor-PA01VEN03 (Levine Auto Parts Norwalk).
  • Purch.Org-PA10
  • Purchasing Group -PA
  • Company Code -PA10

Note :

Please click HERE to check the step by step BP vendor creation in detail

Please click below link to check the MM Organization structure used in PO creation- Configure SAP S4 HANA Material Management Organization Structure in 5 Minutes

Picture : PO Header Creation

2.4.2 PO Line Item

Below main fields are available to input in PO line item

  • Item Category – Blank as we are creating standard PO as described above.
  • Material -66
  • Plant -PA10
  • SLOC-PP1A (Defaulted from Material Master)
  • PO Quantity – 1 PC
  • Price – 14 USD/PC (From info record)

Note :

Please click HERE to check the step by step material creation in detail

Picture : PO Line item

2.4.3 PO Line Item Details

There are several tabs giving different details for PO line item.

We can select the line item in drop down for which we are checking the details as shown in the below screenshot

Picture : Selection of PO item in drop-down

Let,s see one by one “Material Data” Tab

Main information in this tab are batch & “Info-update” indicator

Picture : “Material Data” Tab “Quantities/Weight” Tab

In this tab material information related to weight and volume flows from the material master records.

Also system multiplies weight & volume from the material master by the PO quantity to show the total PO weight & volume.

Picture : “Quantities/Weight” Tab “Delivery Schedule” Tab

In this tab , system shows delivery date and related information. for STO this tab shows schedule line type information with committed quantity as per the availability check.

Picture : “Delivery Schedule” Tab “Delivery” Tab

In this tab system shows further information related to delivery like what is the under-delivery or over-delivery tolerance, reminders etc. All these information flows from the purchasing value key.

Picture : “Delivery” Tab

Some very important information is shown in this tab as described below

a) Stoke type

The goods will be receipt in “Unrestricted” or “QI” or “Blocked stock” as per the selection here.

Stock Type  can be manually selected or if configured, flows from the QM view of the material master.
b) Goods Receipt Indicator

This indicator specifies if goods receipt is expected.

GR Indicator comes as active by default based on the Item Category and Account Assignment Category.

--> In case of Standard Item Category w/o Account Assignment Category, GR Indicator comes by default 

--> In case of Account Assigned POs, default settings depends on the configuration of Account Assignment Category
c) Goods Receipt, Non-Valuated

Specifies that the goods receipt for this item is not to be valuated at GR. If selected then valuation for this item will be done at the time of invoicing.

This flows from account assignment category configuration

d) Delivery Completed” Indicator

if this is selected then it means system is not expecting further delivery for this item i.e this item is closed. “Invoice” Tab

This tab has very important information.

Picture : “Invoice” Tab
a) Invoice receipt indicator

This indicator specifies if an invoice receipt is expected for the purchase order item.

If  Invoice receipt indicator is not set, the goods are to be delivered free of charge

This indicator flows from
--> Define External Representation of Item Categories , under Control invoice receipt section.

--> For account assigned PO it will come from account assignment category.
b) Final Invoice Indicator

Indicates that the last invoice from a supplier has been received for an item with no further invoice is expected.

c) GR-Based Invoice Verification Indicator

This Indicator specifies goods-receipt-based invoice verification for a purchase order item or invoice item.

If this indicator is selected, that means invoice for the order item can be entered with reference to a GR document or a delivery number entered at GR.

Setting of GR-Based Invoice Verification Indicator means a separate invoice item is created for each goods receipt. 

That means checking of price and formal accuracy of the invoice is performed at this item level.
d) Tax Code

Here tax code which is unique per country is specified. For each tax code, tax rate is stored and calculation is done.

Note :

Tax code is automatically determined in this PO tab depending upon the configuration done. Similarly system calculate the tax amount too automatically.

Please check the below post for step by step details of MM input tax

How to configure SAP S4 HANA MM Tax in 7 Easy Steps “Conditions” Tab

In this tab system calculates landing cost of the material depending upon the base price, discount/surcharges, tax, delivery cost etc.

Picture : “Conditions” Tab

Please click HERE to see PO Price components in details “Delivery Address” Tab

In this tab, delivery address which is generally plant address is copied from the plant configuration and presented.

Picture : “Delivery Address” Tab
Please note highlighted "Supplier" with "SC Supp" fields in the above screenshot, which can eliminate one step from the subcontracting purchasing cycle. 

If we select this indicator and input subcontracting supplier , then system directly provide the purchased materials to the subcontractor , which can be seen as special stock "O" in the stock reports of the plant. “Confirmations” Tab

Here confirmation control in the form of Confirmation control key for PO items is defined with just one confirmation category (e.g. shipping notification) or a confirmation control key covering several confirmation categories (order acknowledgment, loading confirmation, shipping notification).

As configured earlier, we have assigned confirmation control key “0004” in our PO item.

So we have to create inbound delivery to do the goods receipt instead of MIGO.

Picture : “Confirmations” Tab

PO is created now

Picture : PO is created Expected Error in PO Creation & Resolution
  • Error M8215 -Maintain tolerance limits for tolerance key PE while creating PO. Please click HERE to check how to resolve this error.
  • Error KI102-Control indicators for controlling area PPIN do not exist. Please click HERE to check how to resolve this error.

2.5 Goods Receipt

Since we have assigned confirmation control key to our PO line item , therefor we can not do the goods receipt by MIGO.

We have to create inbound delivery and do the goods receipt based on the inbound delivery.

2.4.1 Inbound delivery creation

To create inbound delivery start VL31N

Picture : Starting of IBD creation
Picture : IBD Creation Next Screen

Please note Item category is determined as “YELN” in the above inbound delivery.

Input the batch number.

Click on Header details and select “Administration” tab. You will note that delivery type is “YEL” as specified in “Confirmation Control Key”

Picture : Inbound Delivery “YEL” Type

--> Please click HERE to check "Receiving Point" determination configuration in Inbound Delivery

--> Please click HERE to check Item category "YELN" determination in Inbound Delivery

save the inbound delivery

Picture : Inbound Delivery is created

2.4.2 Display Inbound Delivery

you can display inbound delivery through VL33N

or alternatively Inbound delivery number is updated in the “Confirmation” tab of the PO line item as shown in the below screenshot

Picture : Inbound delivery in Purchase Order

Double click on the inbound delivery and system will take you to display inbound delivery VL33N.

2.4.3 Good Receipt 1st Step -Inbound Delivery Put-away

Inbound delivery based goods receipt is done in two steps. First step is put away of the goods and second step is Goods Receipt.

Start VL32N & input you delivery number . Press enter

Click on “Stock Placement” tab

Picture : Inbound Delivery put-away

input put-away qty as 1

--> Please note that you need to put-away full delivery quantity in order to be able to do goods receipt.

--> If lesser quantity from delivery quantity is available then change the delivery qty equal to the qty available for put-away.

2.4.4 Good Receipt 2nd Step -Inbound Delivery GR

As soon as inbound delivery put-away quantity is entered , put-away status is changed from “A-For put-away” to “C-Compl. put away”

Picture : Put-away Completion

Now press on “Post Goods Receipt”. Goods Receipt is completed

Picture : GR Completion

Document flow as well as PO history is updated.


With the goods receipt completion, Stock is posted in the inventory with automatic FI postings in the background to the relevant accounts. Please see the below post to check in all the consequences of goods receipt in detail.

Ultimate guide to configure S4 HANA MM-FI Integration

2.6 Invoice Verification

After PO & Good receipt, the next step in P2P cycle is invoice verification

Since invoice receipt indicator is selected in PO (flowing from item category) so invoice is expected for this PO (item).

Picture : “Invoice” Tab
Please check the below post to see the configuration & testing of Invoice verification

How to Configure Logistics Invoice Verification in SAP S4 HANA

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