Material Ledger in SAP S/4HANA

Updated: Aug 18, 2021

Material Ledger


· What is material ledger?


Material Ledger (ML) is a most useful and important tool with in SAP ERP.

SAP making continuous improvement in Material Ledger.

Material ledger is classified as a sub-ledger of General Ledger (G/L) accounts.

It is an important power full tool is cost management. Material ledger is solution

to perform actual costing. There are two traditional methods of valuation of

Material


o Standard Costing: Standard costing an effective method of obtaining stable price of a material which can be benchmark for any price fluctuation. That price variance posted in P& L account if the all product not sale. Price variance effect the cost of product if those products remain long time in your stock.

o Moving Average Costing: Moving average price is a method which is capable to keep your material cost up to date. Because in present era the cost of material having fluctuation. Every time business is perform a goods or invoice receipt. The moving average price is updated based on the total inventory value in which the latest purchase prices is consider and dividing it by the total inventory quantity,. One drawback of moving average costing is that the new price is only posted in back of inventory. Existing inventory will allocate back to inventory. And remainder will be posted to the price variance account. If we looked at moving average price of the material it will not represent the true current price of material.



· What is objective of material ledger?


1) Inventory valuation in up to three currencies and valuation method.

2) Performing actual costing.

The material ledger takes the price variances that occur from inventory

Transactions and posted them back to inventories in order to value them at

Actual cost. It does while retaining cost is standard cost of the material as

Benchmark. We have option to revaluate the current standard cost with the

Periodic unit price. Which is the actual cost of the material cost calculated by material ledger?


The price determination with material ledger is of two types.


o Single level Price determination: This take the price variance which occur for

an individual material and roll them back into its ending inventory.


o Multi level Price Determination: This takes the variance that occur for a lower level product for a lower level product example Raw Material. And roll them into proportion of consume quantity into a higher level product example finished product.


By using Material ledger revaluation of consumption can be complete and we

can achieve actual cost of ending inventory of single or multilevel products and

cost of sales. We can measure easily procurement processes according to

Standard Costs.

· Configuration Settings


The configuration settings for Material Ledger are sub divided in to three groups


o Prerequisite Settings that have to be checked which delivered by SAP

as part of standard delivery. The term check refers to these prerequisite.


T-Code: SPRO

Menu Path SPRO-> IMG Screen->Enterprise Structure-> Definition-> Define Valuation Area


2 Option

1) Valuation area Plant Level

2) Valuation Area Company Code Level


-> Select Radio button of Valuation Area Plant Level it is mandatory


o Setting Define by the customer by the customer in the customer namespace,

and customer specific. The system uses automation to request individual customer setting during the personalization process. These settings can be initial or can be reused from existing SAP ERP system.


T-Code: OMX1

Menu path SPRO->SAP IMG Screen-> Controlling-> General Controlling-> Multiple valuation approaches/

Transfer Prices-> Basic Settings->Check Material ledger Settings->Activate Valuation Areas for Material Ledger-> Activate Material Ledger

On the change view of “Material Ledger Activation” overview screen make the settings

Click on save


o Additional Settings that need to be made covered either by automation or manual configuration in the customer namespace.

T-Code: OMX2


Menu path SPRO->SAP IMG Screen-> Controlling-> General Controlling-> Multiple Valuation Approaches/Transfer Prices-> Assign Currency types to Material Ledger Types

-> On the change view “Define Material Ledger Type” overview screen, choose new entries


o Assign Material Ledger type to Valuation Area

T-Code: OMX3

Menu path SPRO->SAP IMG Screen-> Controlling-> General Controlling-> Multiple valuation approaches

Transfer Prices-> Basic Settings-> Check Material ledger Settings-> Assign Material ledger type to Valuation Area

On the change view of “Assignment of Material Ledger types of Valuation Areas” overview screen choose new entries


· Production Startup Material Ledger


o Assign Material Ledger type to Valuation Area


T-Code: CKMSTART

Menu Path: SAP Easy Access-> SAP Menu-> Logistics-> Material Management-> Valuation Actual Costing/Material Ledger-> Environment-> Production Startup-> Set Valuation Area as Productive


  • Execute


o Check ML Relevant Customizing Settings


T-Code: CKM9

Menu Path: SAP Easy Access-> SAP Menu-> Logistics-> Material Management-> Valuation Actual Costing/Material Ledger-> Environment-> Check Customizing Settings


  • Execute



Rajesh Sharma

Certified SAP MM/EWM Functional Consultant Linked in profile

https://www.linkedin.com/in/rajesh-sharma-3a565821/

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