What is External Service Management?

The main difference between Service Management and External Service Management is that Service Management provides services to the client while External Service Management is use for the procurement of services only.

Every Organization or Company need goods to complete its day today business needs. Besides these goods procurement, an organization may require occasionally some kind of services. These services will include small maintenance task like changing the lights, painting and housekeeping. These services are carried out by external contractors and hence the whole process of procurement of services is known as External service management.

 Important features about External service management

• Services are meant for direct consumption instead of keeping them in inventory.
• Service description along with unit of measure is stored as master data in a record that is known as service master record.
• System stores the services that have been procured as a record in a sheet called as service entry sheet.

Types of External Service Management.

• Unplanned Services - In unplanned services at the time of procurement specifications like quantity and price are not known in advance. It means nature and scope of service is not clear before procurement. These services can be extended as per the requirement.
• Planned Services - In planned services at the time of procurement specifications like quantity and price are known in advance. It means nature and scope of service is clear before procurement. 

Service management deals with following terms.

• Service Master Record

In SAP MM service master record contains description of services along with the unit of measure. It also contains the detail of all the services that can be procured from external vendor within an organization. This master record serves as a reference for creating service purchase order but it is not necessary, service purchase order can also be created manually without reference.

• Service Purchase Order

In SAP MM services are accomplished with the help of service purchase order. The requirement of service with its description along with quantity is given to third party in form of service purchase order. In service purchase order important field is item category. For service, item category will be D.

• Service Entry Sheet

In SAP MM System stores the services that have been procured as a record in a sheet called as service entry sheet. In case of services instead of creating goods receipt document we will create service entry sheet. Service entry sheet will accommodate the charges that we need to pay to the vendor.

Documents process of External Service.

The receiving is a 2 step process. Create and then Accept Service Entry Sheet.The item category is D (services) is used, to perform service purchase order. 

• Step 1 - Create Purchase Requisition 
• Step 2 - Convert to Purchase Order 
• Step 3a - Service Entry Sheet 
• Step 3b - Acceptance of Service Entry Sheet 
• Step 4 - Invoice and payment (not shown here) 

Difference between SAP purchasing process for External Services and SAP purchasing cycle. 

The big difference is that the item category is D (services) is used.With External Services, you have a PO for services with Goods Receipt taking place. The Goods Receipt is called Service Entries. In contrast with goods (stock or non-stock) where receiving is typically done by the inventory management group, the Service Entries are done by business themselves.