The Procurement Process
Objectives
- Describe the basic business process of procuring stock materials
in an ERP System.
- Discuss the integration points in procurement to Financial
Accounting and Inventory Management.
- Discuss the reporting and analysis tools used by R/3 in the
procurement cycle.
Hierarchical Enterprise Structure
Client
highest hierarchy level, e. g. group with its daughter companies
Settings made will affect all company codes
S
18.000
18.000
18.000
18.000
3.283
3.283
3.283
3.283
137
12.137
137
12.137
12.248
1.248
12.248
1.248
12121323
12121212
12121323
12121212
Company Code (FI)
Org. Unit can present a balance sheet according to the legal
provisions legally independent enterprise
Settings made will only affect the respective company code
Purchasing organization
procures material or services for the assigned plants
negotiates on terms & conditions with vendors make contracts
is responsible for all the purchase processes
operative purchasing is done by purchasing groups
Plant
Operational facility within a company code (e.g. factory, store, ...)
has its own requirements planning and inventory management
Storage location
a space for logical inventory management
Purchasing organization
material
group
purchasing organization
purchasing group MG 0, 3
purchasing group MG 1, 4
purchasing group MG 2, 5
purchasing group MG 6
plant
purchasing group MG 7, 8, 9
Inventory Management with a Warehouse
Management System
0001 ABC inc.
client
0001 Jones inc.
company code
purchasing organization
plant
distrib.center 0001
storage location
0001
0001
0002
0002
0003
0002
storage bin (physical stock)
0003
0004
0001
0003
MM
factory
0004
001
warehouse number
storage type
0002 Model Ltd.
001
WM
002
05-04-03
05-04-04
The Module MM Main Functions
Maintenance of the material master record (different views)
Material requirements planning
Material procurement: handling of the documents for
- purchase requisition
- request, quotation
- vendor selection
- purchase order, outline agreement
- vendor master record
Inventory management
- goods movement, material valuation
Invoice verification referring
purchase orders, goods received documents, delivery
notes etc.
MM interdependencies to other modules
Logistics
PP
production
planning
MM
material master
SD
sales and
distrib.
purchasing
requirements plan.
QM
quality
management
FI
financial acc.
inventory mgmt.
invoice verification
CO
controlling
PM
plant
maintenance
AM
fixed assets mgmt.
Basic Data
Master records - include information about
1. vendors
2. material and services to be procured
3. the relation between 1. and 2. (purchasing info record)
e.g. prices / terms and conditions
bills of material for
- production planning
- purchasing
- sales and distribution
- withdrawal of Material
Structure of the Vendor Master Record
sections
utilization
General data
name
address
control data
area of validity
client wide
purchasing
terms and cond.
partner functions
currency
request for quotation
quotation processing
purch. order handling
accounting data
bank account
acc. maintenance
payment
invoice entry
invoice verification
payment handling
for each
purchasing
organization
client wiede or
for each
company code
Views on the Material Master Record
each view is maintained by a certain user department of the firm
accounting: valuation- und calculation-specific information
requirements planning: information about material requirements
planning (e. g. reorder point)
purchasing: e. g. responsible purchasing group, order unit
engineering: technical information
storage: information about warehousing, material movements, ...
forecast: information about the forecasting of the material requirements
S & D: informationen about sales orders and price determination
purchasing info record
info record
prices
terms & cond.
PO statistics
tolerance levels
date
quotation
outline
agreement
order
Procurement
The primary SAP R/3
application modules that
support the Procurement
process are:
Sales &
Distribution
Materials
Mgmt.
Controlling
Production
Planning
Purchasing
Goods Receipts
Invoice Verification
- Production Planning
Purchase Requirements
- Financial Accounting
Payment Processing
Materials Valuation
Fixed Assets
Mgmt.
R/3
- Materials Management
Financial
Accounting
Client / Server
ABAP/4
Quality
Mgmt.
Plant
Maintenance
Human
Resources
Project
System
Workflow
Industry
Solutions
Purchasing Process
PO
?
=
invoice
X
X
X
invoice verification
X
X
determination: requirements
vendor
X
X
X
outline agreem.
determination: source of supply
MM
goods received &
inventory mgmt.
vendor 2
vendor 1
PO
vendor selection
PO
PO
PO monitoring
purchase order processing
Procurement Cycle
The procurement cycle may consist of eight processes:
Purchase Order
Purchase Order
8. Payment
1. Requirements
determination
2. Source
determination
7. Invoice verification
Purchase Order
Purchase Order
6. Goods receipt and
inventory management
5. Order follow-up
3. Requisition assigned
to a Vendor
4. Order processing
Business Process Flow for Procurement
The main documents and transactions in the Procurement
process are:
Purchase
Requisition
Purchase
Order
Goods
Receipt
Invoice
Posting
Planning, Reporting, and Analysis
- Note: Payments to vendors are usually made at specified
times (e.g. at the end of the month).
- Payment amounts are determined according to the open
invoices posted on the system.
Purchase Requisition Processing
or
Material Resource
Planning
Direct Entry
Purchase requisition
Determine source of supply
Purchase Order
Purchase Order
Purchase Order
Release strategy
Purchase order
Purchase Orders
A purchase order is a formal request to a vendor to provide
certain materials or services under specific conditions
(quantity, price, delivery date, etc.)
Purchase
Requisition
Purchase
Order
Goods
Receipt
Planning, Reporting, and Analysis
Invoice
Posting
Create Purchase Order (PO)
vendor 2
purch. order
1
vendor known
terms & cond.
2
vendor not known
source list
purch. order
outline
agrement info record
vendor
vendor 2
assigned purchase
requisition exists
(from user department)
purch. req.
purch. order
Purchase Order Processing
Purchase
Purchase
Order
Order
Direct Entry
or Purchase
Requisition
Standard
Standard
Sub
Subcontract
contract
Consignment
Consignment
Third-party
Third-party
Statistics
Order History
Purchase Order
Purchase Order
Purchase Req.
Stock material
Consumable material
Service
Account assignment
(cost center, asset,
project)
Goods Receipt
When goods are received from a purchase order, the item
data is copied from the purchase order into the goods
receipt document.
Purchase
Requisition
Purchase
Order
Goods
Receipt
Planning, Reporting, and Analysis
Invoice
Posting
Goods Receipt for Stock Material
Entering the goods receipt increases the inventory level
of a material that is procured for stock.
Purchasing
documents
Items
1.
2.
3.
Goods
Receipt
Vendor
Warehouse / stores
Inventory Management (MM module)
controls and records all goods movement,
form purchase order receipt through the
plant, to consumption
Results of a Goods Receipt Posting
Transaction documents are created both for materials
management and finance.
Accounting
document
G/L accounts:
Consumption account
GR/IR account
Material
document
Stock quantity
Consumption statistics
Goods Receipt
Posting
Goods receipt
slip
Purchasing data:
Order item, Order history
Point of consumption
Cost center Order
Transfer
Order
Posting an Order Entry (Goods Receipt)
Logistics
PP
production
planning
MM
purchasing req. planning
goods receipt
SD
sales and
distrib.
inventory mgmt.
goods issue.
QM
quality
management
FI
financial acc.
inventory
controlling
transfer
posting
invoice
verification
CO
controlling
PM
plant
maintenance
AM
fixed assets mgmt.
Invoice Processing
This last step in the procurement process includes invoice
verification and updating accounts payable in the FI module.
Purchase
Requisition
Purchase
Order
Goods
Receipt
Invoice
Posting
Planning, Reporting, and Analysis
- Payment will then be made later based upon the open
invoices posted on the system
Invoice Verification
input
information
orders
goods receipt
master data:
material
vendors
accounts
terms & cond.
invoice verification
output
information
actions:
enter invoice
verify invoice
post invoice
update
relevant data
(re-edit
invoice)
financial
accounting
asset
management
cost accounting
Invoice Verification Environment
Invoice verification accesses data from purchasing,
inventory management, material master, and vendor
master files.
G/L accounts
Purchase
Order
Assets
Purchase Order
Purchase Order
Cost centers
Vendor
Invoice
Goods
Receipt
Material master
Vendor master
Projects
Invoice
verification
Orders
Posting
Postingan
aninvoice
invoicein
inthe
theR/3
R/3System
System
updates
updatespurchasing
purchasingand
andaccounting
accountingdata
data
Vendor Payment
Accounts payable reads the invoice file and pays all posted
invoices due. (Payment runs can be automated to occur at
specific times.)
Vendor
Financial
Accounting
1000
Bank
Payment
Payment
program
program
1000
1449
Motor Sports International
1234 Main Street
New York, NY 10181
Date _______________
Pay to: ________________________________________
________________________________________________________
_______________
Released
Invoice
_________________
12930 39040 2020 20202 10923 1449
Procurement Integration
MM
PP
Purchase Order
Purchase Order
Goods Receipt
Invoice Verification
Invoice
FI
FI
Reporting and Analysis
Standard Reporting provides List Displays (pre-defined
programs) by:
- Vendor
- Material
- Account assignment
- Material group
- Purchase order number
- Tracking number
General Analysis
Order Value Analysis
Inventory Transaction Analyses
Logistics Information System (LIS)
The Logistics Information System (LIS) contains several
information systems such as:
- Purchasing Information System
- Inventory Controlling
- Sales Information System
- Shop Floor Information System
LIS extracts its data from the operative applications; it
offers many different views on this information.
Logistics Information System (LIS)
The LIS exists for the entire logistics system in R/3
The LIS contains several information systems such
as:
- Inventory Controlling
- Sales Information System
- Shop Floor Info System
- Purchasing Information System
The LIS extracts data from the operative applications;
offering it in many different views, the depth of which
Logistics
is determined by the user.
Information
Systems
Logistics Information Library
Sales
Information
System
Purchasing
Information
System
Inventory
Controlling
Shop Floor
Information
System
Maintenance
Information
System
Quality Mgmt
Information
System
R/3
Sales and
Distribution
(SD)
Materials
Management
(MM)
Production
Planning
(PP)
Plant
Maintenance
(PM)
Quality
Management
(QM)
Logistics
Processing
Systems
In Summary
The basic procurement process includes:
- Goods receipt
- Purchase requisition
- Invoice processing
- Purchase order
Procurement master data includes the vendor and material
master files.
At various times during the Procurement process,
integration occurs between the PP, MM and FI modules.
The two reporting tools used in the procurement
environment are:
- Standard Reporting
List Displays
General Analysis
Inventory Analysis
- Logistics Information System
Purchasing Information System
Inventory Controlling System