Creating a Third-Party Purchase Order

The automatically created purchase requisition must be converted into a purchase order. Using this purchase order, the supplier is asked to deliver a certain quantity of a material on the specified delivery date to your customer. If needed, in addition to third-party items, the purchase order can also contain other items.

The following slide shows the structure of a third-party purchase order.

The (purchasing) item category Standard (blank entry) is used for normal procurement transactions that will lead to a goods receipt posting in your own enterprise.

The (purchasing) item category S (Third-party) is used for procurement transactions that involve a direct delivery to another enterprise (that is, one of your customers).

The document type of the purchase requisition is determined based on the automatically determined schedule line category CS. In Customizing, you can determine which purchase order document types are permitted for the conversion of a certain purchase requisition item into a purchase order item. This configuration setting also depends on the (purchasing) item category involved in the process.

Source determination is used to identify and assign sources of supply for purchase requisition items.

Source determination can be executed automatically when a purchase requisition is (automatically) generated. Suppliers and supplying plants are possible sources of supply for externally procured materials and services. However, in third-party deals, only suppliers can be used as a source of supply.

To determine the list of suppliers that are possible sources of supply, the system analyzes purchasing info records and outline agreements (contracts and scheduling agreements). It is also possible to use a source list and/or a quota arrangement. This are especially useful if the system should automatically assign a source of supply to a purchase requisition item.

A Quota Arrangement can be used to determine the source or sources of supply for a purchase requisition item based on a specific quota distribution across the possible sources. Requirements (that is, purchase requisition quantities) can be automatically distributed across various sources of supply based on quota numbers during a certain validity period.

The Source List is also used during source determination to determine valid sources of supply at a certain point in time. It contains a list of possible sources of supply for a material and the periods in which procurement is possible using these sources of supply. It can be also be used to block a specific source of supply for a certain period.

Quota arrangements and source lists are maintained material and plant-dependent.

A source of supply is only assigned to a purchase requisition item when the source of supply can be uniquely identified. If more than one sources of supply are valid, the SAP S/4HANA system does not automatically assign a source of supply.

A quota arrangement has the highest priority in source determination. A source list has the second highest priority in source determination.

If neither a quota arrangement nor a source list exist for a material, the system checks whether exactly one outline agreement item or exactly one info record exists for the requested material and then this information can be used during source determination. Keep in mind however that the exact way of working of the system with respect to source determination depends on the scenario used. Source determination during an MRP run differs slightly from source determination for a third-party item which is again different from triggering source determination manually in a purchase requisition.

When determining sources of supply, the system can also take into account the various Planning Delivery Times stored in either purchasing info records and/or outline agreement items. You can use a user parameter called EVO (containing default values for purchasers) to specify that when determining sources of supply for purchase requisitions, the system should only consider sources of supply that can also fulfill the requested delivery date. An example: a supplier is identified as a possible source of supply. This supplier however cannot deliver the material on the requested delivery date due to a long planned delivery time for the material. This supplier should then be disregarded during source determination.

In terms of quantity-related checks (Can a supplier deliver the requested quantity?) only limited functionality is available for third-party items.

During an MRP run, various fields in a quota arrangement can be used to influence which source should be assigned for a material; for a third-party purchase requisition item, however, the only restriction is that the quota arrangement item's maximum quantity cannot be exceeded.

For third-party order processing, purchase orders are created from purchase requisitions in the usual way; the buyer must assign a source of supply to every purchase requisition item that did not yet receive an automatically assigned source of supply (when the sales order was created). The buyer must then convert all items into purchase orders. Purchase requisition items can be grouped together by, for example, material number (and account assignment).

SAP S/4HANA supports various SAP Fiori apps that can support the buyer to do this conversion. One example is the SAP Fiori app called Process Purchase Requisitions.

When creating a purchase requisition, the system automatically copies the customer number (ship-to address) from the sales order item into the purchase requisition item and displays this address on the Delivery Address tab in the purchase requisition item. This data is then also automatically copied into the purchase order item once the purchase requisition is converted. In a third-party process, you can only change the delivery address in the sales order, and not in the purchase order.

If, during third-party order processing, the ship-to address is changed in the sales order, these changes are automatically copied into the purchase requisition and, if a purchase order already exists, also into the purchase order.

In the sales order, you can enter purchase order texts for each third-party item if needed. When a purchase requisition is created, these texts are then copied automatically into the purchase requisition item, and from there into the purchase order item. You can make settings for the transfer of texts in Customizing for purchasing in your SAP S/4HANA system:

• Transfer of texts from sales order items to purchase requisition items
• Transfer of texts from purchase requisition items to purchase order items

The number of the purchase order created is displayed in the document flow of the sales order. You can branch to the purchase order from there, and potentially, you can look at existing follow-on documents in the purchase order history.

Third-party items in purchase orders are using item category S (Third-party). Third-party items also need an account assignment in the purchase order item. The account assignment category X (All auxiliary account assignments) is the one that is used by default in the standard SAP S/4HANA system.

In Customizing for purchasing in the SAP S/4HANA system, you can define which account assignment categories can be used in combination with a specific item category.

The settings in the account assignment category may not, however, contradict the settings in the item category or categories used in combination with the respective account assignment category.

Prerequisites for the automatic creation of the purchase order are as follows:

• The Create PO automatic. indicator must be set in the sales item category.
• A unique source of supply must exist for the third-party item (see Source Determination discussed earlier).
• In the configuration of the Sales Organization for which the sales order is created, the ALE data must be maintained: the document type for the purchase order that will be automatically created and any other additional data for the purchase order must be entered.