Logistics

Procurement

Lesson Overview In this lesson you will gain an understanding

of the Procurement processes and how Procurement is integrated within other solutions.

Lesson Objectives After completing this lesson, you will be able

to:– Outline the tasks associated within the procureme

nt cycle– Explain how SAP within mySAP ERP supports the

key processes in Procurement

Business Example Your company, IDES, needs materials for the

ir production processes. Materials are procured directly for stock. IDE

S employees can procure consumable materials directly from online catalogs.

Procurement Process Overview Procurement in mySAP ERP covers not only traditio

nal processes such as requisitioning, purchase order management, and invoice verification, but also catalog-based self-service requisitioning for maintenance, repair, and operations (MRO) materials and services.

This catalog integration is expanded to maintenance operations and project management.

Procurement in mySAP ERP improves procurement processes by facilitating plan-driven and ad hoc purchasing, complete inventory management, and intelligent reporting on all procurement activities.

In addition to providing supplier relationship management tools, mySAP ERP enables supplier selection and qualification, contract negotiations, bid invitations, and vendor evaluation.

Support for process variant optimization allows individual categories of material or services to be procured in the most appropriate way; for example, the subcontracting process supports the delivery of components required by outsourced manufacturing steps, and procurement through invoicing plans helps improve rental and leasing processes.

The basic Procurement (or Purchase to Pay) cycle for a service or material consists of the following phases:

Determination of Requirements Material requirements are identified either in t

he user departments or via materials planning and control.

You can enter purchase requisitions yourself or they can be generated automatically by the materials planning and control system.

This can cover both MRP and the demand-based approach to inventory control.

The regular checking of stock levels of materials defined by master records, use of the order-point method, and forecasting on the basis of past usage are important aspects of inventory control.

Source Determination mySAP ERP helps you identify potential sour

ces of supply based on past orders and existing longer-term purchase agreements.

This speeds the process of creating requests for quotation (RFQs), which can be sent to vendors electronically via EDI, if desired.

Vendor Selection and Comparison of Quotations

The system is capable of simulating pricing scenarios, allowing you to compare a number of different quotations.

Rejection letters can be sent automatically.

Purchase Order Creation The purchase order adopts information from the requ

isition and the quotation to help you create a purchase order.

As with purchase requisitions, you can generate purchase orders yourself or have the system generate them automatically.

Vendor scheduling agreements and contracts (in the SAP system, types of long-term purchase agreement) are also supported.

Purchase Order Follow-Up The system checks the reminder periods you

have specified and, if necessary, automatically prints reminders or expediters at the predefined intervals.

The system also provides you with an up-to-date status of all purchase requisitions, quotations, and purchase orders.

Goods Receiving and Inventory Management

Goods receiving personnel can confirm the receipt of goods simply by entering the purchase order number.

By specifying permissible tolerances, buyers can limit over- and under-deliveries of ordered goods.

Invoice Verification The system supports the checking and matching of i

nvoices. The accounts payable clerk is notified of quantity and

price variances because the system has access to purchase order and goods receipt data.

This speeds the process of auditing and clearing invoices for payment.

Purchase Orders A purchase order is a formal request to a ven

dor to supply certain goods or services under the stated conditions.

You can create purchase orders without reference, or with reference to a purchase requisition, a request for quotation, or another purchase order.

When you enter the purchase order data, the system suggests default values.

For example, the system suggests the ordering address, as well as the terms of payment and freight (incoterms) from the vendor master record.

If you have maintained a material master for a given material in the SAP system, the system suggests the material short text or the material group, for example.

If a purchasing info record already exists in the system, the system copies a price proposal to the purchase order.

You can either send the purchase order to a vendor or carry out a stock transport order in another plant belonging to your company or group.

In both cases you can take into account the associated freight costs in the purchase order.

Self-Service Procurement Self-Service Procurement allows employees t

o create and manage their own requisitions. It relieves your purchasing department of this

administrative burden while making the procurement process both faster and more responsive.

Providing catalogs of the most frequently ordered materials ensures that employees can easily manage their own purchase orders in accordance with your organization's rules.

Self-Service Requisitioning means purchasing non-strategic goods, that is, goods not directly linked to the value chain (often called MRO: maintenance, repair, and operations items).

This includes, for example, office materials, work clothes, and IT equipment.

Posting a goods receipt to stock with reference to a purchase order has a number of advantages for you, including:– The goods receiving point can check whether the

delivery is the same as the purchase order data, that is, whether the goods that were ordered have been delivered.

The system suggests data from the purchase order when you enter the goods receipt (for example, items and quantities).

This makes it easier to enter the goods receipt and check over-deliveries and under-deliveries when goods arrive.

The purchase order history is automatically updated as a result of the deliveries.

The purchasing department can send a reminder about late deliveries.

When you post a goods receipt to the warehouse, the system creates a material document containing information such as the material delivered and the quantity delivered.

The system also records the storage location for the materials you place into stock in the plant.

In transactions relevant for material valuation, the system creates at least one accounting document that records the effects of the goods movement on the value of the stock.

Invoice Verification The procurement process is concluded by the invoic

e verification process, during which invoices and credit memos are entered and the contents and prices are checked for accuracy.

However, payment and evaluation of invoices is not part of invoice verification; the appropriate information for these tasks passes on to other departments.

Invoice verification, therefore, creates a link between Procurement and Accounting.

When you enter an invoice with reference to a purchase order, the system suggests data from the purchase order and the goods receipts for the purchase order (for example, vendor, material, quantity still to be invoiced, terms of payment, and so on).

If there are discrepancies between the purchase order or goods receipt and the invoice, the system warns the user and, depending on the system configuration, blocks the invoice for payment.

The posting of the invoice completes the invoice verification process.

The system updates the purchase order history and Financial Accounting initiates payment for the open invoice items.

Messages You can issue all purchasing documents as messag

es. Each time you create an RFQ (Request for quotation

), purchase order, contract, or scheduling agreement, the system can create a message from the document affected.

This message is then placed in the message queue.

The message queue contains all messages that have not yet been transferred to the vendors.

To issue the message (by printing, e-mail, fax, or EDI) from the message queue, you have the following options:

Issue immediately: – The system issues the message directly from the queue, in

other words, as soon as you save the document.

Issue later: – Either you schedule a background job that processes the m

essage queue in determined intervals, or you start the issue directly from the purchasing menu.

– As a rule, you issue the messages using the background job and start the issue manually only as an exception (such as for rush orders).

For the message issue, you can specify which header texts and item-based texts the system issues.

The header text is printed at the top of the purchase order and contains general information.

Item texts describe a purchase order item in more detail.

You can also include and issue standard texts. In the ordering transaction, you can display a docum

ent on your screen before printing it.