Source List Determination in SAP MM

In the SAP Material Management (MM) module, Source List Determination plays a vital role in streamlining procurement processes. This mechanism ensures that purchasing decisions are guided by pre-defined and approved sources, thereby enhancing accuracy, compliance, and cost-efficiency. But what exactly does the source list do, and how is it related to vendor evaluation and quota arrangements? Let’s explore the key functions, configuration options, and relevant transaction codes that make source list management essential for optimized procurement.

What is Source List Determination in SAP MM?

A Source List is a control tool in SAP used to define approved vendors or sources of supply for materials. It determines who the valid supplier is at a specific plant and during a specific period. When configured correctly, the source list helps ensure that:
  • Only approved vendors are used
  • Contractual obligations are met
  • Procurement is compliant with internal policies
It can also lock out unauthorized suppliers, thereby reducing risk in the procurement process.

Plant-Level Source List Requirement

You define the source list requirement at the plant level. If a source list requirement is active, it must be maintained for every material before creating a Purchase Order (PO). 

Key Point: Without a valid entry in the source list, SAP will not allow the creation of a purchase order—even if a vendor exists in the vendor master.

How Does the Source List Work?

Here’s how the source list influences procurement:
  • It contains all valid sources of supply for a material.
  • Each entry specifies the vendor, validity period, and any special status such as "fixed source".
  • If a vendor is marked as fixed, the system prioritizes them for procurement during the validity period.
For instance:
  • Material 100XX may have:
    • Vendor ASA Company set as fixed for Q1
    • Vendor BSB Co. set for Q2
SAP will automatically choose the relevant vendor based on the timeline.

Is the Vendor Picked from Quota Arrangement or Source List?

This is a common question: 
  • Quota Arrangement manages how procurement quantities are distributed among multiple vendors.
  • Source List defines which vendors are valid for a material and when they can be used.
Answer: The vendor for a Purchase Order is determined through both source list and quota arrangement. However, the source list acts as the first filter. If the source list requirement exists, only vendors listed in the source list are considered—then, within those vendors, quota arrangement decides allocation.

Vendor Evaluation and Its Role

Vendor Evaluation is used to assess vendors based on:
  • Delivery performance
  • Quality
  • Price competitiveness
  • Compliance
While evaluation helps decide who should be included in the source list or awarded higher quota percentages, it doesn't directly pick vendors during PO creation. That's the role of the source list and quota arrangement.

Source List Configuration Path in IMG

To set up a source list requirement for materials at the plant level: SPRO Path: Logistics → Materials Management → Purchasing → Source List Here you can:
  • Activate source list requirements for specific plants
  • Ensure that materials have valid source list entries before PO creation

Essential SAP Transaction Codes for Source List Management

TCode Description
ME01 Maintain Source List
ME03 Display Source List
ME04 Display Changes to Source List
ME05 Generate Source List
ME06 Analyze Source List
ME07 Reorganize Source List
ME0M Display Source List for Material

Field: Source List Requirement in Material Master

Within the Purchasing View of the material master, you'll find the Source List Requirement checkbox. When checked:
  • The material must have an entry in the source list.
  • Otherwise, purchasing transactions like PO or PR creation will be blocked.

Benefits of Maintaining a Source List

  • Ensures procurement compliance and controls unauthorized purchases
  • Simplifies vendor selection with clear guidelines
  • Automates vendor picking during PO creation
  • Enables integration with outline agreements and contract validity

Frequently Asked Questions (FAQs)

Q1. What happens if a material doesn't have a source list but the requirement is active?

A: The system will block PO or PR creation for that material until a valid source list entry is added.

Q2. Can I have multiple vendors for the same material in a source list?

A: Yes, and you can define validity periods and fixed source priorities among them.

Q3. Is the source list the same as quota arrangement?

A: No. The source list determines which vendors are valid; quota arrangement distributes how much to buy from each.

Q4. How do I fix a vendor in the source list?

A: Use TCode ME01 to mark the “Fixed Source” checkbox for a vendor during a specific period.

Q5. Can I automate source list generation?

A: Yes. Use ME05 to generate a source list automatically from purchasing info records or outline agreements.

Q6. How can I track changes to a source list?

A: Use ME04 to display a log of changes made to source list entries.

Conclusion: Optimize Your SAP Procurement with Source List Management

The source list in SAP MM is more than just a list—it’s a powerful control mechanism ensuring that procurement stays efficient, compliant, and aligned with business goals. When combined with vendor evaluations and quota arrangements, it offers a robust foundation for smart purchasing decisions.

Understand the Different Types of Info Records 
What are the Types of Inforecords?

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