Outline Agreement in SAP MM: Contract & Scheduling

What is Outline Agreement?

Outline agreement is a long-term purchase agreement between vendor and customer. Outline agreement are two types:

1. Contract
2. Scheduling Agreement

Contract The contract is draft agreement, and they do not include delivery dates for the material. Contract is two types:

1. Quantity Contract: This contract considered to fulfilled when the company supplied an agreed total quantity of materials against the contract.
2. Value Contract: This contract considered to fulfilled when the company supplied agreed total value of material against the contract.

Both forms serve the same purpose: they let a buyer negotiate once and order many times. The difference lies in how the commitment is measured and whether delivery timing is agreed up front, which the comparison below sets out before the creation steps.

Contract vs Scheduling Agreement

Choosing between the two decides how much administration each subsequent delivery costs, so it is worth settling before the agreement is created.

Parameter	Contract	Scheduling Agreement
Agreement type	MK quantity, WK value	LP scheduling agreement
Create transaction	ME31K	ME31L
Delivery dates included	No	Yes, through schedule lines
How goods are called off	A release order referencing the contract	Schedule lines maintained in ME38
Documents per delivery	One purchase order each time	None, the schedule line is the trigger
Fulfilled when	Target quantity or value is reached	Validity period ends or target is reached
Best suited to	Irregular demand at a negotiated price	Regular, predictable supply such as production components

In short, use a contract when the timing is unknown and a scheduling agreement when it is not. A scheduling agreement removes a purchase order from every delivery, which is why it dominates repetitive manufacturing supply.

Create Quantity Contract

Step 1)

1. Enter T-code ME31K in the command field.
2. Enter Vendor / Agreement Type (MK- Quantity Contract) / Agreement Date.
3. Enter Purchase Org., Purchasing Group in organizational data.

Step 2) Enter Validity End date of contract in header data screen.

Step 3)

• Enter Material, Target quantity (A quantity for which quantity contract being created) and net price
• Click On Save Button.

A message as will be displayed.

Create Scheduling agreement

The scheduling agreement is a long-term purchase agreement with the vendor in which a vendor is bound for supplying of material according to predetermined conditions. Details of the delivery date and quantity communicated to the vendor in the form of the delivery schedule.

Step 1)

1. Enter T-code ME31 in command field. In current releases ME31L is the dedicated transaction for scheduling agreements.
2. Enter Vendor / Agreement Type (LP- Scheduling agreement) / Agreement Date.
3. Enter Purch. Organization / Purchasing group.

Step 2) Enter Validity End Date in header screen.

Step 3) Enter Material / Target Quantity / Net Price / Plant in Item Overview Screen.

Step 4) Enter Exclusion in next screen.

Step 5) Get back previous screen item overview and click on save button. A message as below –

Release Orders and Delivery Schedules

Creating the agreement is only half the process. Nothing is delivered until quantity is called off against it, and the two agreement types call off in completely different ways.

Calling off against a contract. A contract release order is an ordinary purchase order that references the contract instead of quoting its own price.

1. Open ME21N and set the document type to NB.
2. Switch the document overview to outline agreements and search for the contract number.
3. Adopt the required item. Price, conditions, and vendor are copied from the contract, and only the quantity and delivery date are entered.
4. Save. The released quantity is added to the contract, and ME3L shows how much of the target remains.

Calling off against a scheduling agreement. No purchase order is created at all. Delivery is driven by schedule lines maintained directly on the agreement.

1. Open ME38 and enter the scheduling agreement and item.
2. Enter one line per delivery with a date and a quantity. Dates can be daily, weekly, or monthly depending on the agreed release cycle.
3. Save the schedule. Depending on configuration, releases are transmitted to the vendor as a forecast or just-in-time delivery schedule.
4. Goods arriving against a schedule line are received with a normal goods receipt, referencing the agreement rather than an order.

This is why a scheduling agreement suits production supply. A hundred deliveries need a hundred purchase orders under a contract, but only a hundred schedule lines on one document under a scheduling agreement. Where the source of supply should default automatically, add the agreement to a source list and mark it as fixed.

Outline Agreement Transaction Codes

Contracts and scheduling agreements each have their own transaction family, following the SAP pattern of 1 to create, 2 to change, and 3 to display.

Transaction Code	Purpose
ME31K / ME32K / ME33K	Create, change, and display a contract
ME31L / ME32L / ME33L	Create, change, and display a scheduling agreement
ME38	Maintain the delivery schedule of a scheduling agreement
ME39	Display the delivery schedule
ME35K	Release a contract subject to a release strategy
ME35L	Release a scheduling agreement
ME3L	List outline agreements by vendor
ME3M	List outline agreements by material
ME3N	List outline agreements by agreement number

ME3L is the report to run before renegotiating, because it shows target quantity against quantity already released for every agreement with that vendor. Further steps are covered in creating a purchase order with reference and across the SAP MM tutorial series.

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