Pricing Procedure in SAP MM | Configuration & Types

The pricing procedure in SAP MM will not be merely a technical thing- it will be the real engine for accurate cost calculations and efficient procurement processes. It identifies how to arrange different price elements for the overall purchase price including discounts, freight charges, and taxes applied. It can play a key role in harshly maintaining cost accuracy, consistency across all vendors, and complete transparency in purchasing practices for any business, thus understanding this pricing procedure within SAP MM.

This blog focused on providing the SAP MM pricing procedure, its types, and configurations. Here, we will also provide essential details about the release procedure for PO in SAP MM.

What is Pricing Procedure in SAP MM?

Everything relates to managing price conditions from the procurement stage and their sequence to optimizing costs further by improving negotiation abilities to best value-for-money purchases. Effectively managing price conditions within an organization mitigates risks, prevents undesired current and future spending, and provides timely delivery of goods and services. It reinforces the importance of understanding, what is pricing procedure in SAP MM since it directly affects cost management, negotiation management with suppliers, and the total efficiency of the procurement process in SAP MM. In SAP MM, the pricing procedure calculates material prices based on charges like discounts, taxes, and surcharges, which affect the final price to determine the purchase order price. While the release procedure for PO SAP MM will be discussed later, let’s first enlighten you on how this procedure works.

How Pricing Procedure Works in SAP MM

The pricing procedure in SAP MM is a tool that enables the system to calculate the prices of materials in a purchase order. The following steps represent this procedure:

1. Selecting Pricing Procedure: The system automatically determines the relevant pricing procedure when creating the purchase order based on the vendor and purchasing management combination.
2. Applying Price Conditions: Each price condition is read and employed in a specific sequence (e.g., discounts, taxes, surcharges).
3. Price Calculation: The system calculates prices for all conditions using factors such as quantity, unit price, and applicable discounts.
4. Net Price Determination: The system combines all conditions to arrive at the final net price.

This pricing procedure in SAP MM configures condition tables, access sequences, and price controls for accurate price determination.

Types of Pricing Procedure in SAP MM

The pricing procedure in SAP MM is distinguished for the different business needs and procurement scenarios. Each procedure defines how price elements are associated or calculated through predefined parameters like materials, vendors, or purchasing conditions.

Standard Pricing Procedure

The standard pricing procedure in SAP MM is a predefined set of rules concerning the pricing calculation of a material in a purchase order. The pricing procedure applies the different price conditions (for example, gross price, discounts, taxes, etc.) in a specified order to achieve systematic, precise, and methodical procurement price calculations across the organization.

Other Pricing Procedures in SAP MM

Such variability of these pricing procedures for the same purchase scenario is at the core of procurement management in SAP MM. Here are some types of pricing procedures in SAP MM:

• Custom Pricing Procedure: Integrates into the business configuration and allows for other settings such as surcharges, freight cost, and special discounts.
• Material Group Pricing Procedure: Pricing done by material groups ensures that the same pricing logic applies to similar items in the company.
• Vendor-Specific Pricing Procedure: Customized pricing rules build on agreements between individual vendors.

SAP Warehouse Management lays down detailed structures to determine how costs are calculated and applied in purchasing.

Configuring Pricing Procedure in SAP MM

Price determination requires a pricing procedure in SAP MM  with a stepwise configuration.

1. Define Condition Tables: Navigate to SPRO → Materials Management → Purchasing → Conditions → Maintain Condition Tables. Create or use existing tables, defining the combination of fields (e.g., Vendor, Material) for price conditions.
2. Define Access Sequences: Go to SPRO → Materials Management → Purchasing → Conditions → Maintain Access Sequences. Set the sequence for condition tables to be accessed during pricing.
3. Define Condition Types: In SPRO → Materials Management → Purchasing → Conditions → Define Condition Types, create or modify condition types like Gross Price and Discounts, and assign access sequences.
4. Define Calculation Schema: Navigate to SPRO → Materials Management → Purchasing → Conditions → Define Calculation Schema. Assign condition types to the schema and define calculation sequences.
5. Assign Schema Groups: Assign schema groups to vendors and purchasing organizations.
6. Maintain Condition Records: Use transaction MEK1 to create and maintain pricing condition records.

Follow these steps to configure your SAP MM pricing procedure for pricing accuracy and consistency. We have learned the configuration for the pricing procedure; next, we need to break into what the release procedure is in SAP MM.

Release Procedure for PO in SAP MM

Understanding the release procedure in SAP MM is essential for maintaining control over procurement processes. POs have been released based on specific criteria before they are approved for budget or order value to ensure the purchase approval before sending orders to the vendors. The release procedure is for approval, while the pricing procedure in SAP mm calculates the final cost for both processes working together to ensure the correct execution of all authorized purchases.

What is Release Procedure in SAP MM?

Release procedures for POs in SAP MM facilitate the electronic authorization and approval of purchase documents like purchase orders and purchase requisitions. It includes built-in compliance with dual control principles without manual signatures. You can configure approval processes with or without item-based approval. It offers flexibility through various release and approval document types.

How Release Procedure for PO Works in SAP MM

Here is a step-by-step guide on how the release procedure for PO SAP MM works:

• Configuration: Set up the release strategy in SPRO (Materials Management > Purchasing > Purchase Order > Release Procedure for Purchase Orders).
• Assign Release Groups: Define approval levels and assign release codes to users.
• Create PO: The buyer creates a PO and selects the appropriate release indicator.
• Release Workflow: The PO is routed to the relevant release group for approval.
• Approval: Authorized users review and approve or reject the PO.
• Next Level Approval: If needed, the PO moves to the next approval level.
• Released Status: Once approved, the PO is marked “Released” and sent to the vendor.

Conclusion

The pricing procedure in SAP MM constitutes a key mechanism to arrive at the final cost of materials by employing different conditions such as discounts, taxes, and surcharges. It ensures the organization that costs can be calculated accurately and uniformly across vendors for efficiency in procurement. On the contrary, the release procedure for PO in SAP mm governs the approval workflow, requiring different levels of authorization before you can send a purchase order to the vendor. This procedure ensures that made purchases are pursuant to company policies, budgets, and compliance requirements. Together, these processes assist the organization in cost control, transparency, and a smooth procurement cycle.

Revamp SAP MM Pricing with Cloudbook!

Unlock SAP MM pricing procedures. Join Cloudbook’s expert-led sessions to configure and optimize pricing strategies effectively.

👉 Connect with us directly: Registration Link

📱 WhatsApp: (http://wa.link/04d8tw or ✆ +91-9289246569).

🖱️ SCM-CLOUDBOOK