Delineating Procurement Processes

In detail, a typical procurement process includes the following phases:

• Determination of Requirements:

  Employees of a business department can manually create a purchase requisition to inform the purchasing department about material requirements. If you have set a materials requirements planning (MRP) procedure for a material in the material master, the SAP system automatically generates a purchase requisition.

• Determination of Supply Source / Supplier Selection:

  The system supports buyers in determining possible supply sources. You can refer to purchase orders, outline agreements, and purchasing information records that already exist in the system. In addition, you can create requests for buyer quotations (RFQs).

  To find out which supplier has the best prices you can carry out price comparisons between various supply sources or quotations.

• Purchase Order Processing:

  Similar to purchase requisitions, you can create purchase orders manually or let the system create them automatically. When you create purchase orders, you can copy data from other documents (such as purchase requisitions or quotations) to reduce the amount of entries that need to be made.

• Purchase Order Monitoring:

  Monitor the processing status of the purchase orders in the system. For example, you can determine whether a delivery or invoice has already been received for a purchase order item. You can also remind vendors about outstanding deliveries.

• Goods Receipt:

  Enter inbound deliveries in the system by referring to the associated purchase order to reduce the number of entries that need to be made. Referring to the associated purchase order also allows you to check whether the goods and quantities delivered match the purchase order. The system updates the purchase order history.

• Invoice Verification:

  Enter invoices in the system by referring to the previous purchase order or delivery to check the calculations and accuracy of the invoice. The availability of purchase order and goods receipt data means that you can be informed of any differences in quantity and price.

• Payment Processing:

  Run the payment program to pay vendor liabilities. The accounting department is responsible for running this program regularly.

As well as the normal procurement process described previously, various other special procurement processes are also possible, for example:

• Stock transfer with stock transport order

• Subcontracting

• Vendor consignment

You control the procurement process that you want to use with a purchase order item using a special indicator known as an item category.

With this type of procurement, goods are procured and delivered within one company. The plant that requires the materials can order from another plant of whom can supply the materials. Therefore, this stock transport process involves not only inventory management, but also purchasing in the receiving plant.

In the subcontracting process, your company orders material from an external supplier. In subcontracting, unlike a normal external procurement process, your company provides the supplier (subcontractor) with some or all the components required to manufacture the material.

When a supplier provides you with material that you store but are not required to pay for immediately, it is called supplier consignment. The supplier remains the owner of the material until you remove some quantity from your consignment inventory. A liability arises for the supplier when you remove any quantity of the material from the consignment inventory. These withdrawals are settled in agreed periods.

Before you procure a material from a supplier for a consignment, you and the supplier must agree on a price for the material. In the system, the price information has to be recorded in a consignment information record. Only then a supplier consignment inventory for a material can be posted in the system.