Source Determination in SAP MM – The Ultimate Guide

 

Source determination

Source Determination in SAP MM refers to the process of automatically identifying the most appropriate source of supply for a material. This is a key feature for optimizing procurement, ensuring the right vendor is selected based on predefined rules, contracts, and priorities.

🚀 Why Source Determination Matters

  • Reduces manual effort in purchase requisition and purchase order creation.

  • Ensures procurement compliance.

  • Helps streamline MRP and operational procurement processes.

  • Facilitates better vendor relationship management and pricing.

🔄 Overview of the Source Determination Process

When a purchase requisition is created (manually or via MRP), the system checks the following source of supply records:

  1. Quota Arrangement

  2. Source List

  3. Outline Agreements (Contracts and Scheduling Agreements)

  4. Purchasing Info Records

  5. Business Partner data


Each of these plays a role in guiding SAP to pick the right vendor.

🧠 How the System Determines the Source (Logic)

Priority Order for Source Determination:

Priority

Source Type

Description

1️⃣

Fixed Vendor

Vendor manually fixed in source list

2️⃣

Quota Arrangement

Splits procurement among multiple vendors based on quota %

3️⃣

Source List

Contains list of valid vendors and validity periods

4️⃣

Outline Agreement

Includes contracts or scheduling agreements

5️⃣

Purchasing Info Record

Basic record linking vendor and material


🧩 Master Data Prerequisites

Before source determination can work, these data elements must be in place:

✅ Source List

  • Created using T-code ME01.

  • Must be flagged as MRP-relevant.

  • Controls if a source is allowed/blocked for procurement.


✅ Quota Arrangement

  • T-code: MEQ1

  • Splits requirements among vendors based on %.

  • Requires valid info records for all vendors.


✅ Info Records

  • T-code: ME11

  • Links vendor-material with pricing, delivery data.


✅ Outline Agreements

  • ME31K (Contracts), ME31L (Scheduling Agreements)

  • Provide long-term procurement sources.

🛠️ Configuration Steps (SPRO Paths)

🔧 1. Activate Source Determination in Purchase Requisition

SPRO → Materials Management → Purchasing → Purchase Requisition → Source Determination

  • Set indicator for automatic source assignment in user parameters or MRP settings.

🔧 2. Define Source List Requirement for Materials

SPRO → MM → Purchasing → Source List → Define Source List Requirement

  • Set indicator for plant/material combination.

🔧 3. Set Up Quota Arrangement Usage

SPRO → MM → Purchasing → Quota Arrangement → Define Quota Arrangement Usage

🔄 Source Determination in MRP

When MRP is run (MD01, MD02, MD03), if source list is active and relevant data is maintained:

  • The system checks for valid and MRP-relevant source list entries.

  • If multiple entries found, it refers to fixed vendor or quota arrangement.

💡 Important: If no valid source found, the PR is created without a source of supply and needs manual assignment.

📘 Real-Time Examples

🧪 Example 1: Fixed Vendor from Source List

  • Material: RM-500

  • Vendor: V1001 (Fixed in Source List)

  • MRP runs → PR created with vendor V1001

🧪 Example 2: Quota Arrangement

  • Vendor A (60%), Vendor B (40%) maintained in MEQ1

  • Based on historical PO quantity, the system proposes vendor A or B proportionately

🔄 Source Determination in Purchase Order (Optional)

When creating PO manually (ME21N), if source list or info records are available:

  • SAP proposes the vendor automatically if:

    • Source list is active.

    • Only one valid vendor is maintained.

📌 Tips for Consultants

  • Always maintain validity dates in source list and info records.

  • Use transaction ME05 to analyze and assign sources to PRs.

  • Regularly run ME57 for assigning sources to open purchase requisitions.

  • Use ME61 to maintain vendor evaluations that may affect selection in advanced scenarios.

💼 Integration Points

Area

Integration

MRP

Automatic PR with source

Procurement

PO creation, scheduling agreements

Vendor Management

Source monitoring and compliance

Analytics

Spend analytics by vendor source


🧠 Advanced Features

  • Source Determination in S/4HANA Fiori App – Use “Manage Purchase Requisitions” for interactive sourcing.

  • Automatic Source List Update from Info Records – Controlled via configuration (SPRO → Purchasing → Info Record → Update Source List).

  • Multiple Valid Sources – The system uses quota arrangement if defined, otherwise the earliest valid source.

📍Conclusion

Source determination in SAP MM is a powerful automation tool that ensures consistent and optimized vendor selection. By maintaining proper master data and configuration, businesses can:

  • Improve procurement efficiency.

  • Reduce errors and manual work.

  • Ensure compliance with vendor strategies.

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