PM06 Capital Work Order - Consuming 'Stock' Material from Warehouse

[Former Member]

Hi all,

We use Order Type 'PM06' for Capital Work Orders in our SAP system which are subsequently settled to an 'Asset Under Construction' (AUC).

In most cases when Materials (Components) are required for these Work Orders, they are procured directly via the Work Order itself.  So at Goods Receipt, the cost of the Material is allocated to the Work Order and subsequently transferred to the 'AUC' at settlement.

In some cases, we find that we may already stock the Material required for the Capital Work Order in our Warehouse.  In these cases, it is easier for us to consume the Material from our Warehouse rather than going through the process of procuring the Material externally again.  I have verified that this process works correctly and also that the value flow is correctly reflected from our Inventory accounts to the 'AUC' at settlement. 

My question - within the context of 'PM06' Work Orders, is anyone aware of any reasons why you would choose not to consume the Material from your Warehouse (in the second scenario) and procure it externally instead - as a business rule?

All help and advice is greatly appreciated.

Best wishes,

Ravelle

[Former Member · Accepted solution]

It may be just guess!!!

The materials which are bought & kept in stock will have some moving average price, which will be used for small maintenance activities. As this will have average price, cost incurred on particular can't be found out exactly.

Whenever we go for some Investment order (Capital order), to capture the actual & current cost exactly, instead of going for stock items, materials will be procured externally. So that, materials cost & additional overheads like tax, transportation, other duties, etc., will be included. It will give clear picture on cost which incurred on specific Investment. So Asset value will be more accurate & realistic.

Apart from cost perspective, Material planning can be done on Investment order wise which will minimize inventory level.

[Former Member]

Thanks Maheswaran, Manu and Lucky for your help with this. 

I certainly have a better idea of some of the additional considerations with this scenario now.

Best wishes,

Ravelle

[Former Member]

Hi,

Investment orders are dedicated capital investments for a particular project/ expansions. Usually organizations have a separate planning and budget for that, which may include the selective vendors for procurement. SAP functionality would definately let you to consume the warehouse material, but it is upto descretion of your organization.

However, it is always a better approach to consume the warehouse stock only for what it is being maintained as it avoids any material shortage for unplanned requirements.

Regards.

Lucky.

[Former Member]

Hi

If you are doing a purchase for a capital intensive project , you may be buying materials from a specified Vendor and may be in Bulk, the price of the material may be different here as and when compared to stocked item which may have been purchased few months back.

Inflationary preasures etc may also have an influence on the current price (MAP) of the material

I hope it helps.

Thanks

Manu