Introducing Purchase Order Management
Dispatching Purchase Orders
Viewing and Interpreting Purchase Order Information
Modifying and Managing Active Purchase Orders
Advanced Purchase Order Operations

Define the Purchase Order Lifecycle

Objective

After completing this lesson, you will be able to define the end-to-end Procure to Pay process, and Purchase Order lifecycle to determine the impact on procurement efficiency and compliance.

Define the Procure to Pay Process

The Procure to Pay process is the end-to-end workflow that begins with identifying a need for goods or services and ends with payment to the supplier. It includes requisitioning, purchasing, receiving, invoicing, and final payment. The Procure to Pay process facilitates control, visibility, and compliance throughout the procurement cycle.

  • Purchase Requisition (PR):

    The Procure to Pay Process begins when a user creates a Purchase Requisition (PR) for goods or services.

  • Purchase Order (PO):

    The PR, once approved, generates one or more Purchase Orders (PO)s which are sent to suppliers over the SAP Business Network (or in some cases, are delivered manually).

  • Fulfillment:

    Suppliers fulfill the PO by shipping the goods or providing the services. During this stage, suppliers can optionally send Order Confirmation, or Advanced Shipping Notice messages via the SAP Business Network to provide more information.

  • Receipt (RC) or Service Entry Sheet (SES):

    Once items arrive, or services are rendered, Buyers enter receipts or process service entry sheets to confirm receipt of the goods or services.

  • Invoice (INV):

    Suppliers send invoices to request payment.

  • Invoice Reconciliation (IR):

    During the Invoice Reconciliation process, invoices are matched against POs and Receipts to resolve any discrepancies that may exist on the Invoice.

  • Payment Request (PAY):

    Once reconciled and approved, the system generates a Payment Request, which is sent to the Buyer’s ERP system.

  • Remittance:

    The Buyer’s ERP issues payment to the supplier, and the payment information, known as Remittance, can optionally be loaded into SAP Ariba Buying and Invoicing for visibility and status updates.

Summary

  • The Procure to Pay process starts with a Purchase Requisition (PR) to request goods or services.
  • An approved PR generates a Purchase Order (PO) sent to the supplier.
  • The supplier fulfills the PO and may send confirmations or shipping notices.
  • Buyer records Receipt (RC) or Service Entry Sheet (SES) to confirm delivery.
  • Supplier sends an Invoice (INV) requesting payment.
  • The system performs Invoice Reconciliation (IR) to match against the PO and Receipt.
  • A Payment Request (PAY) is sent to the ERP for processing.
  • The ERP issues Remittance, and payment status may be reflected back in Ariba.

Define Purchase Orders

In the context of Procurement, it’s important to differentiate Purchase Requisitions and Purchase Orders.

Purchase Requisition (PR):

  • An approvable document created by a user.
  • Represents a request for products or services from one or more suppliers.
  • After approval, it’s used to generate one or more Purchase Orders.
  • Can be edited to create change orders or cancel orders.
The screenshot is of a Purchase Requisition.

Purchase Order (PO):

  • A legal document, created by the system.
  • Never edited directly.
  • Represents a proposed agreement for the supply of goods or services.
  • Sent to one supplier.
The screenshot is of a Purchase Order.

Summary

  • A Purchase Requisition (PR) is a user-created, approvable request for goods or services.
  • Once approved, a PR generates one or more Purchase Orders (POs).
  • A PO is a system-generated legal document sent to a supplier and cannot be edited directly.
  • PRs can be revised (via change or cancel orders), while POs reflect finalized agreements.
Learning
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