The Comprehensive Guide To Using SAP MM (Materials Management) For Pharma

Materials management (MM) is a core functionality in SAP S/4HANA that is a driver for logistics and supply chain operations across various sectors, from pharma to retail and many in between. The purpose of SAP MM is to streamline the management of integral processes, such as inventory, consumption-based planning, purchasing, receiving, as well as storing goods and materials.

What is SAP Materials Management (MM)?

In simpler terms, MM is a subset of logistical management: where logistics is a broad term pertaining to the movement of goods along the supply chain, specifically their acquisition, transport, warehousing/storage, and delivery, MM comprises a set of activities around three distinct flows that lend value to the supply chain.

These are:

  1. Materials flow: The movement of MATERIALS from the vendor/supplier, to the enterprise, and then to the end user/customer. The return of products or materials from customers to the enterprise and then to the vendor is reverse flow, or reverse logistics.

  2. Information flow: Communication is a key ingredient of the smooth running of a supply chain. From communicating information regarding orders, restocking, shipping through delivery, timely information and data can go a long way to building the reputation of a company.

  3. Financial flow: Financial documents have to be generated, corresponding to the money moved along with the products or materials, as per the valuation of the material being transported and its status. For instance, from “inventory” to “accounts payable clearing” accounts.

Each one of these flows has a direct and discrete impact on the smooth functioning of a supply chain network, which is made up of both people (vendors, suppliers, transporters, distributors, and retailers), and places (warehouses, storage facilities, distribution centers and sale outlets). Logistics in SAP/S/4HANA follows the aspects of the materials’ journey from manufacturer to end user/consumer, integrating all the critical supply chain functionalities.

How is SAP Materials Management (MM) relevant for the Pharma industry?

Long term interaction and experience with the pharmaceutical industry has provided valuable insights and knowledge.

Based on these, SAP has developed a portfolio of diverse reference solutions plus content for pharma industry, namely, SAP Model Company for Pharmaceuticals. The service comes prepackaged along with SAP S/4HANA- just another reason why so many businesses are looking to migrate to the S/4HANA system.

Some benefits of SAP MM for Pharma include:

  1. It is ready to be deployed across end-to-end processes.

  2. It incorporates the most current best practices across the industry along with master data.

Suggested reading: How to keep the Pharma industry healthy with good SAP implementation

Example of Pharma Success With SAP

A great example of this is the adoption of SAP S/4HANA by a Central Americal pharma company with a presence in 14 countries.

From being new to SAP, to going live in less than eight months is a testimonial to the successful pathway to implementation.

In addition to Material Management, the configuration included Finance, Controlling, Sales and Distribution, and Funds management functionalities.

Rethinking the Pharma supply chain with SAP Materials Management (MM)

In the Pharmaceutical industry, the end point of the supply chain/ end user /consumer is the patient.

Globally, patients are becoming more aware about health and healthcare aspects and have an active interest in their own treatment.

In addition, pharma companies have to come up to speed on new regulations and market trends. This sets the stage for constant evolution of both the distribution and management practices.

The pharmaceutical industry, healthcare sector, and healthcare payors form a triad, and within each segment of it are ensconced important aspects of pharma management including

- demand forecasting

- inventory planning

- procurement

- purchasing goods and materials (which involves actual money transactions)

- business costs

- contractual terms and agreements.

The nature of the materials involved in a pharmaceuticals supply chain (time and temperature sensitive, for instance), specific application, highly rigid storage and transport conditions, regulatory requirements to be met all make materials management highly specialized.

Technically, the pharmaceutical supply chain has to cover drug research and development and materials thereof, and then manufacture and distribution. The distribution and application aspect require collaborations with various healthcare services in addiiton to ancillary businesses that contribute to the smooth functioning of the various links of the pharmaceutical supply chain.

For pharma companies, the importance of taking control of their own distribution practices cannot be undermined, particularly when there are many regulations to hold up and patients to shield from any errors or product defects that may manifest at any juncture, during relabeling, for instance.

SAP Pharma Materials Management: Processes, Advantages And Challenges

From a pharma industry standpoint, SAP-enabled materials management confers the following notable advantages:

  • Procurement records can be better maintained and manufacturing standards can be adhered to, minimizing errors and risks.

  • There is a centralized location for uploading stage-wise, real-time batch processing and production reports. Moreover, drug quality reports are updated at a regular frequency, and visible to employees across all relevant departments. This ensures adherence to product quality standards.

  • Companies can be agile with demand-based production as inventory management is streamlined and clear estimates of stock levels of materials needed to start manufacturing are readily available.

  • Alerts and notifications are sent to concerned staff when a material or a product is approaching its expiry date.

Managing Materials Master Data In SAP ERP

Materials master data is needed to track product costing, MRP, Bill of Material (BOM), work center, and Routings. The process begins with calculating material cost estimate, marking and releasing the cost estimate. The system accesses BOM and Routing for finished goods, using it to calculate the cost of goods manufactured plus cost of goods sold for each product unit. Once this is done, the material is marked “live” within the SAP.

When a production order is created, master data from SAP MM is tapped to source the raw materials needed for manufacturing the product, and to create sales orders and other transactional data downstream.

However, some challenges still remain in SAP Master data management, which also impact materials management in general and are important to deal with from a future standpoint:

  1. For one thing, maintaining SAP master data is not an easy task in operational practice. Clean master data is a prerequisite for digitalization and subsequent automation of business processes. Therefore master data management (MDM) must be made a primary focus in most industries, and pharma is no exception. To cite a common example, a material master data record in SAP MM can contain up to 600 discrete or individual fields. In multi-national companies such as pharmaceuticals, who also have widely scattered production sites, several departments, and well-established hierarchical structures, the resulting complexity can take on massive proportions. Even while managing material master data using SAP MM, there are add-on influences such as a CRM for customer data and such. Thus, company-wide integration of data from all these widely-dispersed data sources presents a major challenge.

  2. The Internet of Things (IoT), while being a major enabler of connectivity, and in this case, connected manufacturing and production processes, is also contributing to the burgeoning of data buildup across the globe, which is an enormous challenge to the data management systems of the future.

SAP Materials Management and Pharma: A match made in heaven, a marriage built on end-user enablement

Challenges with SAP implementation, even for Materials Management, often come down to delays because people either don't know how to use the module, or have too many questions which makes them reluctant to try.

One way to offset these challenges is to identify the gaps and build a workflow to counteract the problems that may arise.

Often, a dedicated team is given the task of carrying out the corrections, however, with the exponential growth of data, manual processes may soon fall short.

In addition, maintaining accurate records and keeping up with data in real time within a Materials Management System is crucial, as is keeping a watchful eye on inventory levels and conducting periodic audits. Assigning unique project number schemas, maintaining material catalogs, accurate material descriptions, classifications, and units of measure, creating a cost coding structure, entering correct manufacturing and storage locations etc. all need to be done to maintain accurate master data.

For pharma companies looking for a MM SAP training solution that fits across all its global entities, Espresso can help with quality and specialized eLearning to bring large numbers of employees up to speed.

Challenges with SAP implementation, even for Materials Management, often come down to delays because people either don't know how to use the module, or have too many questions which makes them reluctant to try.

Our years of being a SAP L&D solutions provider, and intimate knowledge of industry trends and concerns, have led us to develop Espresso, a ready-to-deploy learning solution for companies such as yours.

Pharma companies only have to pay an annual fee and can have multiple employees trained, and the best bit is that training can begin in less than five days from now.

All modules are designed to facilitate learning in any format of choice, and they are continually improved basis real-time insights from your end-users, adding to the richness of industry-specific training content.

Espresso brings into alignment company goals, manufacturing, distribution, and other departmental priorties, delivering an end product that gives tangible results on a departmental as well as company-wide scale.

With Espresso, over 70% training content for Materials Management has been standardised, leaving ample space for industry specific examples and a multitude of learning methods.