Working with Contracts

An outline purchase agreement is a long-term agreement with a supplier covering the supply of materials or the provision of services, subject to predetermined conditions. These apply for a predefined period and a predefined total purchase quantity or certain total purchase value.

For long-term outline agreements, you can also store several condition records for each item if, for example, the outline agreement is to last five years and prices within this validity period are to decrease annually by 3%.

An outline agreement does not contain data on specific delivery dates or quantities to be delivered.

Depending on the type of outline agreement, this data is transmitted to the supplier in one of the following ways:

• Contract: contract release order

• Scheduling agreement: delivery schedule

The following are the key differences in the use of a contract and a scheduling agreement:

• The volume of documents:

  In the case of a contract, as a rule, you create a new purchase order in the system each time you release goods or services against the contract. With a scheduling agreement, however, there is only one more document in addition to the contract document. This document is the scheduling agreement delivery schedule line, which is extended continuously.

• Use in automatic materials planning:

  Requirements planning can be set up in a way that the contract item is automatically assigned to a requisition item as the source of supply. However, this requisition must subsequently be converted into a purchase order (= contract release order). In the case of a scheduling agreement, you can directly generate scheduling agreement delivery schedules from the planning run, so that no further processing in purchasing is required.

Contracts can be created with or without reference to the following:

• A purchase requisition

• An outline agreement requisition

• A request for quotation (RFQ)

• Another contract

Various item categories can be used. The item category influences the document field control.

Depending on the type of item, data must be created as follows:

• If the contract item is a stock material, purchasing and accounting data must have been created in the relevant material master record.

• If the contract item is a consumable material, the account assignment data may already be stored in the contract. Alternatively, you can use the account assignment category U (Unknown), which indicates that the account assignment data must not be specified before creating the contract release order.

In plant-specific contracts, a release order can only be created for the relevant plant. In a centrally agreed contract, however, you can store different conditions or partners for individual plants.

A centrally agreed contract can also be created from a central purchasing organization. When creating a contract item, the system does not check whether the purchasing organization that creates the contract is responsible for a particular plant. This check only occurs in the contract release order. If the release order is performed from another purchasing organization, the central purchasing organization of the releasing purchasing organization must be assigned as the reference purchasing organization.

Accumulated values are updated at the item level for quantity contracts, and at the header level for value contracts. You can list all contracts that are going to expire in the near future. The analysis, which is based on a suitable selection parameter, is run on the Target Value and Total Release Value fields for value contracts and the Target Quantity and Quantity Released to Date fields for quantity contracts.

In Customizing for Materials Management under Purchasing → Reporting → Maintain Purchasing Lists → Selection Parameters → Define Selection Parameters, you can define a percentage of the target value or target quantity above which a contract is to be regarded as expiring.

Beyond the value and quantity, you can also check contracts with regard to their validity period.

On the SAP Fiori launchpad, following SAP Fiori apps are available for contract monitoring:

1. Off-Contract Spend: You can use the Off-Contract Spend app to analyze the total spend amount in relation to purchase orders that do not have a contract reference, over the previous year to date. For some items, no negotiated pricing or blanket purchase agreement is in place when they are purchased. These items are defined as non-contract purchases. You can use this app to measure the percentage of purchases made without any contract.

2. Unused Contracts: You can identify contracts for which a release has not taken place within a specific time frame. With Unused Contracts, you can find the released amount of the unused contracts in the display currency and the IDs of all unused contracts.

3. Contract Expiry: You can use this app to identify purchase contracts that expire within a specific time frame (default: 90 days). You can also use the app to find the number of expiring contracts, target amount, and the released amount of the expiring contracts.

4. Contract Leakage: With the Contract Leakage app, you can identity the spend of purchase orders that do not have a contract reference, although an existing contract could have been used. As a purchaser, you want to find the related net value. You can use the Contract Leakage app to determine the amount of purchases made without considering existing contracts.

5. Value Contract Consumption: You use this app to identify the consumption percentage of value-type contracts from the previous year to date. You can also find the target and released amount of the contracts.

6. Quantity Contract Consumption: You use this app to identify the consumption percentage (value-based, not quantity-based) of quantity type contracts from the previous year to date. You can also find the target and released quantity of the contracts.

To get an overview of your contracts, you can use the app Manage Purchase Contracts. This app gives you a graphical overview of your contracts including the consumption and expiring data. If a contract is about to expire or has already expired, you can edit the contracts.

Another app for monitoring contracts is Monitor Purchase Contract Items. With this app, you can display aggregated values of purchase contract items for material groups and filter them according to your requirements.

The following table lists useful evaluations available for contracts in the back-end system:

In addition, the following apps are also available on the SAP Fiori launchpad:

• Manage Purchase Contracts
• Manage Purchase Contract Items