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Purchase Price Variance in Materials Management

We have a process called (Purchase Price Variance)This process was created in order to control the deviation from the standard cost. Typically we use “frozen standard cost” that means that for a period of time – typically 1 year – we freeze the cost in the system for a particular product. Let’s say we setup part number “A” where the cost = $1/EA. Now, if I want to create a Purchase Order for this item then I may deviate from this price and say that the purchasing price is $2/EA. In that case the PPV process kicks off and PO remains unapproved until somebody approves it and say we can purchase this product on a higher price too. . Usually there are thresholds here, like: - If deviation is less than 20% then auto approve (in above example the standard cost is $1/EA, so if purchase price is less than $1.2/EA then it is going to be auto-approved from a PPV standpoint) - If price deviation is > 20% then it goes to person “X” for approval, etc. We can further sophisticate the deviation levels. Is this an SAP capability to do this? How can this be achieved in SAP , plz give a brief heads up

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1 Answer

  • Best Answer
    May 26, 2015 at 09:01 AM

    Hi Anil,

    You can use PO release strategy for the same. In this case you define your characters and value for same example 20% as thresh value and it would check for the same. Plus this will make sure if yo have greater then 20% then approval process is there.

    Go through SAP note 365604 & 207490 to get an overview of the same.

    Let me know if it helped.

    Regards

    Rahul

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