Outlining Central Purchase Contracts (2ME)

The Central Purchase Contracts (‏2ME‏) scope item describes the central contract created in the central purchasing organization and distributed to other subsidiaries. It belongs to the Central Procurement business area, which is part of the Sourcing and Procurement line of business.

Central contracts are global, long-term agreements negotiated between an organization and a supplier. This helps to get the best rates and conditions while bundling purchasing volume across multiple subsidiaries. These contracts are typically negotiated by the central purchasing organization, mostly at the headquarters, and used to globally drive operational efficiency and reduced cost while complying with regulations across multiple subsidiaries.

With SAP S/4HANA Cloud, in the multiconnected scenario, an SAP S/4HANA Cloud system can be used as a central (hub) system and various SAP S/4HANA, SAP S/4HANA Cloud and SAP ERP systems can be connected as the connected backend systems.

A central contract that is created in the central SAP S/4HANA Cloud hub system needs to be distributed to various connected systems. A local contract in the connected system needs to be created which will also be used as a source of supply in the connected system.

The central contract, created at the headquarters, can be distributed to subsidiaries to generate local contracts or scheduling agreements. Subsidiaries can then continue with the operational procurement in a seamless manner by leveraging this local contract or scheduling agreement. Central monitoring of contract consumption across subsidiaries and renewal of expiring contracts is easily managed by the headquarters.

The figure shows the Integration Scenarios in Central Contracts.

The End-2-End Process Flow through Central Procurement diagram shows the high level process overview for Central Contracts.

The figure, Process Overview of Central Purchase Contracts I, shows the process overview for Central Purchase Contracts.

The figure, Process Overview of Central Purchase Contracts II, shows the process overviews for Hierarchy Central Contracts and Central Purchase Contracts with Commodity Pricing.

The following are the business benefits:

• Lower your costs for contract negotiation.
• Lower your costs based on scaled purchasing.

The following are the key processes:

• Create central purchase contract and distribution.
• Release central purchase contract (optional).
• Check distributed purchase contracts or scheduling agreements in the backend system.
• Create purchase order or schedule lines in the backend system.
• Import release orders.
• Post goods receipt in the backend system.
• Create supplier invoice in the backend system.
• Create credit memo (optional) in the backend system.
• Perform mass changes to central purchase contracts.
• Monitor central purchase contract items (optional).
• Create hierarchy central contracts.
• Display version history in central purchase contracts.
• Maintain formula and rate for commodity pricing.

The central purchaser can perform mass changes to central purchase contracts. Download, modify, and upload central contracts using Microsoft Excel. You can also create new central contracts and add new items to existing central contracts using Microsoft Excel.

Using the app, you can apply mass changes to fields at header and item level in your central contracts.

• Display a list of central contracts filtered by criteria such as central purchasing organization, central purchasing group, and distribution status.
• Display central contract headers and items separately on two different tabs.
• Select the central contract headers and/or items that you want to change.
• Specify whether you want to clear, replace, or keep values in the fields.
• Select specific central contract information that can be downloaded into a Microsoft Excel file.
• Central purchasers can add new header distribution and item distribution records using the Microsoft Excel file.
• The system creates new versions of a central purchase contract when version-dependent fields are changed.
• Update value of the field Central Purchasing Group for multiple central purchase contracts headers and central purchase contracts hierarchy headers.

Using this app, you can perform the following:

• Define price change reasons for conditions of a central purchase contract item. You can also maintain a pricing scale for a central purchase contract item, simulate a price for a central purchase contract item, and create default conditions for a central purchase contract item.
• Transfer header and item notes, scales, and plant conditions to distributed outline agreements in connected systems. You can also use the Output Control facet to differentiate between various versions or to refer to any specific version of a central purchase contract.
• Create distribution lines at the header level of a central purchase contract hierarchy. You can also enable partners in a central purchase contract hierarchy and view the consumption percentage and GR consumption percentage of an item in a central purchase contract hierarchy.
• View document status and distribution status of a central purchase contract hierarchy. You can also view additional information related to subordinate central contracts of the central purchase contract hierarchy. This includes the last update status and last update timestamp. Additionally, you can use Retrigger Update to retrigger a contract that runs into errors.
• Copy purchase contract hierarchies. You can also copy individual item distribution lines in a central purchase contract hierarchy and delete items and distribution lines in a central purchase contract hierarchy.
• Configure the settings to manage the versioning for central purchase contract hierarchy. You can also view the versions of a central purchase contract hierarchy in the Version History facet and assign legal transactions to a central purchase contract hierarchy.

• Use the Validity Status filter on the list page to filter either central purchase contracts or central purchase contract hierarchies based on the following statuses:

  • Expired

  • Expiring

  • Valid

• Assign an item category to an item in a central purchase contract.

  You can create items for a central purchase contract with the following item categories:

  • Standard

  • Material Unknown (M)

  • Material Group (W)

  • Subcontracting (L)

  You can also renew an existing central purchase contract.

  Note

  • Material Unknown (M): This item category is recommended for similar materials with the same price, but different material numbers. When you create an item for a purchasing document, you provide the short text (description), material group, quantity, and unit of measure; however, you cannot mention the material number. The material number cannot be specified until a release order for such a material is created against the purchasing document.

  • Material Group (W): This item category is recommended for materials belonging to the same material group, but with different prices. When you create an item for a purchasing document, you enter the short text (description) and material group; however, you cannot mention the price. The price and material number cannot be specified until a release order is created against the purchasing document.

  • Subcontracting (L): This item category is a form of procurement where the required product is manufactured by a supplier (in this case the subcontractor) to whom you provide certain components. You can provide these components either directly from one of your plants, or indirectly through one of your suppliers. Using the provided components, the subcontractor completes the manufacturing process and delivers the required product to the ordering party.

  Note

  • The item category Material Group is only applicable for value contracts.

  • If you choose Subcontracting as an item category, you can select from the following address types in the Delivery Address facet:

    • Plant: Displays the plant or storage location provided. This option is displayed by default if you have chosen Subcontracting (L) as the item category and have provided the plant or storage location at the item level.

    • Supplier: Allows you to select a supplier from the connected or hub system.

    • Address Reference Number: Allows you to select an address from the existing address pool.

    • User Defined: Allows you to enter a user-defined address.

  

• Use the filters Material and Material Group on the list page to search for central purchase contracts and central purchase contract hierarchies.

• Update the field Target Value at the header level with the sum of target values of all the items in the central purchase contract. You can also unassign legal transactions from a central purchase contract.

• Add header conditions with a validity period for a central purchase contract and central purchase contract hierarchy. You can also define price change reasons and maintain pricing scales for header conditions. Additionally, you can transfer header conditions along with pricing scales to the connected systems.

• Categorize attachments as internal (SL9) or external (SL1). The attachments marked as internal are not included in the output of the central purchase contract, while attachments marked as external are included in the output. These attachments can be sent to the supplier through the output channels – print, email, and EDI.

• Navigate from the app My Inbox to the app Manage Central Purchase Contracts to view the details of the relevant central purchase contract.

• Maintain payment terms and incoterms at the header, item, and distribution levels of a central purchase contract hierarchy. You can also maintain shipping instructions at the item and distribution levels of a central purchase contract hierarchy.

• View the total consumption (in percentage) at the header level of the central purchase contract hierarchy. Additionally, you can block or unblock items and item distribution lines in a central purchase contract hierarchy. You can also provide the reason for blocking these items and distribution lines.

• Replicate custom field data at the header, item, and distribution levels of the central purchase contract hierarchy to the respective subordinate central contracts in the hub system.

• Compare two versions of a central purchase contract. You can also configure the settings to enable version management for conditions and commodities in central purchase contracts. Additionally, a change request document is now automatically deleted after the completion of its lifecycle.

  

• Create items for a central purchase contract hierarchy with the item category Material Group (W). You can also renew an existing central purchase contract hierarchy.

  

• Add conditions with a validity period for a central purchase contract hierarchy in the hub system. You can also define the constituent commodities for a material in a central purchase contract hierarchy in the hub system.

• Define price change reasons for conditions of a central purchase contract hierarchy at an item level. You can also maintain a pricing scale for a central purchase contract hierarchy, simulate a price for a central purchase contract hierarchy, and create default conditions for a central purchase contract hierarchy.

• Transfer scales and plant conditions of a central purchase contract hierarchy to distributed outline agreements in connected systems.

• View the total consumption (in percentage) at the header level of the central purchase contract.

  

• View the content of the central purchase contract in PDF format by using the Print Preview option.

• View the parent document of the central purchase contract by clicking the ID against the Central Purchase Contract Hierarchy field in the General Information facet.

• View the Distribution Trigger Timestamp in the Distributed Outline Agreements facet. This is the timestamp when the central purchase contract is triggered for distribution to the connected systems.

• View the approval details, such as the processors involved and status, under the Approval Details facet.

• Send the output of a central purchase contract using the EDI channel.

• Add attachments to a central purchase contract.

• Create items for a central purchase contract or central purchase contract hierarchy with the item category Subcontracting (L).

• Cancel a central purchase contract and central purchase contract hierarchy.

• Access the Delivery Address facet for all item categories of a central purchase contract and central purchase contract hierarchy.

• View the renegotiation status of an item in a central purchase contract and central purchase contract hierarchy.

• Navigate to the app Manage Supplier Quotations (for Sourcing Projects) to view the details of the supplier quotation by clicking Sourcing Quotation Number in the facet Item Distribution of the central purchase contract and central purchase contract hierarchy.

• View details of the header conditions in older versions of a central purchase contract and central purchase contract hierarchy in the facet Version History. You can also compare the header condition details of any two versions.

• Add attachments to a central purchase contract hierarchy. Additionally, the checkbox Contract in Preparation is changed to a button Save in Preparation with no change in the functionality.

• Create items for a central purchase contract with the item category Consignment.

• View the approval details of a central purchase contract hierarchy, such as the processors involved and status, under the section Approval Details.
• Distribute central purchase contracts to connected systems based on the Unified Key Mapping Service (UKMS) defined for materials in the hub system.
• Modify payment terms of the distributed purchase outline agreement in the section Distributed Outline Agreement and release the central purchase contract.

• Simulate the distribution of central purchase contracts and check if the distributed purchase outline agreements would be created successfully or result in errors.

  

  You can simulate the distribution of a central purchase contract and check if the distributed purchase outline agreements would be successfully created in the connected system or if it would result in errors. You can use the button Simulate to run these checks even before you release the central purchase contract. You can further use the button Simulation Results to view the results of the simulation.

The central purchase contract hierarchy is a variant of the central purchase contract. It enables large enterprises to consolidate requirements across various business groups.

It distributes the elements of the contract, grouping requirements per business group into one or more subordinate central contracts, establishing one level of hierarchy. Usage of each subordinate central contract could be controlled at respective business group(s).

• Create distribution lines at the header level of a central purchase contract hierarchy. You can also enable partners in a central purchase contract hierarchy. You can also view the consumption percentage and GR consumption percentage of an item in a central purchase contract hierarchy.
• View document status and distribution status of a central purchase contract hierarchy. You can also view additional information related to subordinate central contracts of the central purchase contract hierarchy. This includes the last update status and last update timestamp. Additionally, you can use Retrigger Update to retrigger a contract that runs into errors.
• Copy purchase contract hierarchies. You can also copy individual item distribution lines in a central purchase contract hierarchy and delete items and distribution lines in a central purchase contract hierarchy.
• Configure the settings to manage the versioning for central purchase contract hierarchy. You can also view the versions of a central purchase contract hierarchy in the Version History facet and assign legal transactions to a central purchase contract hierarchy.
• Configure approval at enterprise and business group level.
• Create central purchase contract hierarchy from the Process Purchase Requisitions Centrallyapp by consolidating purchase requisition(s) across connected systems.

With Commodity Pricing, key users can apply complex pricing formulas, commodity weights, and price conditions in Central Procurement.

Price information for the materials can be maintained for different time periods. With Commodity Pricing integration, it is possible to mention the commodities used and to calculate the price for items by including the value of the commodities.

• Maintenance of conditions common to all plants or specific to certain plant
• Maintenance of price variance for different quantity in the form of scales
• Update change reason for any changes introduced in price master data
• Distribution of only relevant price information to local purchase contracts in connected systems
• Holistic picture of the entire price information maintained for items
• Flexibility to maintain commodity information against supplier and materials across time periods
• Commodity pricing enhances pricing with complex rules to calculate a condition rate and a condition value
• Real-time price simulation to see the final/effective value for the item

Gaining fast access to and having high transparency over the main business documents is key for a central purchaser of a multi-ERP procurement landscape.

You can use the Enterprise Search within SAP S/4HANA in order to search their relevant purchase requisitions and purchase orders from all connected satellite systems, as well as any centrally negotiated contracts.

• Search for central purchase contracts and centrally managed purchase requisitions and purchase orders directly via the integrated Enterprise Search of the SAP Fiori launchpad
• Display the main data of the found business objects in the search result section along with filter options and navigation links into the object page and corresponding Fiori apps

Customers will be able to control which of the fields of a distributed outline agreement, either in a local purchase contract or a scheduling agreement, can still be edited by a local purchaser or logistics expert in the respective connected system.

Especially those fields, which are not directly part of a central contract, as they are too specific to the given nature of a particular backend system (e.g. the accounting details), can be centrally declared as either being locally editable or read-only. In contrast to the former locking of the complete backend purchasing document, this partial editability now allows for a controlled maintenance of additional, local outline agreement data.

• Ability to edit a controlled set of fields in the distributed contract or scheduling agreement of a central purchase contract after its initial distribution from the central procurement system
• Ability to edit a set of fields, which are not part of the central purchase contract in particular, within the distributed outline agreement

The following table lists the SAP Fiori apps that are used in Central Purchase Contracts.

The following table lists the SAP Fiori apps that are used in the Central Purchase Contracts with Commodity Pricing Process steps.

The following table lists the SAP Fiori apps that are used in the Hierarchy Central Contracts Process steps.

In Sourcing and Procurement, several Self-Service Configuration UIs (SSCUIs), also referred to as configuration steps, are available in the Manage Your Solution app. The following SSCUIs affect the area of Central Purchase Contracts:

To activate Central Purchase Contracts version management, you must configure following SSCUIs in the central procurement system: