Locate Scope Item in LoB
The Purchase Contract (BMD) scope item belongs to the Sourcing and Contract Management business area, which is part of the Sourcing and Procurement line of business.
This scope item describes the use of contracts in procurement activities. Contracts are agreements with suppliers to supply materials or services under negotiated conditions and within a certain period.
Quantity contracts are agreements for a company to order a certain quantity of a product during a specified period. In source determination, contracts replace the purchasing information records and can be assigned in the source list as the fixed source for Material Requirement Planning (MRP). Target groups are purchasing managers as well as buyers. If purchase requisitions and purchase orders do not yet exist, they are created after the contract. You can check the released purchase orders that are referenced to a contract by monitoring the contract.
Operational Contract Management
Before we understand the business process of a purchase contract, let us first look at the business context of Operational Contract Management. Contract management is the process of managing contract creation, execution, and monitoring to maximize operational and financial performance. Organizations encounter an increasing amount of pressure to reduce costs and improve company performance. Consequently, it is essential that buyers have an effective and efficient system that provides support for monitoring contracts, including the following:
- Dynamic and flexible search and filtering across the entire contract worklist
- Navigation to contract and supplier object pages
- Additional information such as validity status, consumed value, and target values
- Embedded actions for contract renewal and contract creation
The figure, Process Overview, shows the process diagram for the Purchase Contract (BMD) scope item.
Key Process Flows
Key process flows include:
- Create a purchase contract
- Make mass changes to purchase contracts
- Approve purchase contract
- Monitor notification (optional)
- Manage source lists
- Create a purchase requisition
- Assign requisition and creating purchase order
- Find purchase documents by requirement tracking number
- Approve purchase orders
- Monitor contract item (optional)
- Post goods receipt
- Create supplier invoice
Manage Purchase Contracts
With this app, you can get an overview of all existing contracts. You can create new contracts with a specific validity time frame and a target quantity or a target value. When the consumed quantity or value specified in the contracts exceeds the target quantity or value, the system issues a warning. Then, from the list of available contracts, you can directly renew a contract and check the validity status of each contract. Note that you can only access contracts if you have authorization for the respective purchasing group.
You can create a contract template, enabling you to reuse data that is copied from the template whenever you create a new contract. This reduces both the time and effort you spend on filling out the data.
In addition, you can check the contract value that has been consumed so far in all the release orders issued against this contract, along with the release order details. You can display the contract leakage percentage. Contract leakage is a KPI that returns the spend of purchase orders that do not have a contract reference, although an existing contract could have been used.
With this app, you can:
- Search for contracts based on different criteria, such as creation date, validity status, supplier, purchasing organization, and purchasing group.
- Display, create, edit, or delete contracts and contract templates. You can create a contract manually or by using a contract template.
- Renew an existing contract from the list. You can change or extend the validity period, target quantity, or target value of an existing contract without creating a follow-on contract.
- Search for legal transactions and assign them to a contract. You can also display the legal transactions associated with a contract.
- Display contract approvers for all contracts. If a contract is approved automatically, the status Automatically approved appears in the Approver column. If you have not submitted the contract for approval, the status Workflow not yet started appears in the Approver column. For more information about the flexible workflow and approval process, see Manage Workflows for Purchase Contracts.
- Withdraw a purchase contract sent for approval. Then make the required changes to it and submit it again for approval.
- Display and print the output details of contracts using the output control.
- Add conditions to an existing date range or a new date range. You can add conditions to a new date range only while editing a contract. In addition, you can copy existing conditions and modify them to suit your requirements. NoteYou can modify the price unit of a contract item only on the conditions level while you are creating a contract.
- Assign one or more account assignments to a contract item. Multiple account assignments allow you to define how the quantity and value of the contract items are distributed to individual account assignment items.
- Display release order documents for all of the items of a selected contract.
- Display the total net amount of release order items in the contract by calendar month.
- Display contract consumption and leakage.
- Display other sources of supply for the items in a contract.
- Check the supplier’s evaluation rating.
- Make layout changes in the General Information section of contracts at the contract header and item level.
- Create items for purchase contracts with the item category Consignment.
- Add attachments of types external (SL1) and internal (SL9) by activating Harmonized Document Management (HDM). You can also assign attachments to purchase contracts from other business objects and edit existing attachments.
- View all the approvers responsible for approving the workflow in the list and object pages.
- Block and unblock multiple items together in the hierarchy list of purchase contracts.
- Maintain the upper limit and lower limit for condition records in a purchase contract. Also, limits are considered for scales maintained for the condition record in a purchase contract.
Pricing user interface in purchase contracts for time-dependent conditions
One of the main activities a purchaser performs in a purchase contract is the maintenance of price information that is negotiated with the suppliers. Purchase contracts are used as source-of-supply for follow-on processes like purchase orders, where the price information of the purchase contract is used.
We introduced the new pricing user interface at the item level as the latest enhancement to our app for users to maintain purchase contracts.
- Maintain price information for different time periods
- In addition to maintenance of plant-independent conditions, it is also possible to maintain plant-specific conditions
- Support of scale prices in the new user interface
- Ability to perform real-time price simulation for an item and understand the effective value
Manage Workflows for Purchase Contracts
With this app, you can configure workflows to enhance the approval process for purchase contracts. You can define workflow preconditions for releasing purchase contracts, assign specific users as approvers, or choose to approve purchase contracts using other options, such as approval by the accounting object responsible. The approval process starts when a workflow with one or more steps is activated and the preconditions you have assigned to it are met.
- Define preconditions for a workflow, such as the company code, purchasing group, document type of purchase contract, and others.
- Define the order in which the start conditions of existing workflows are checked. If you have defined several workflows, the start conditions are checked in the order you have defined. As soon as the start conditions for a workflow are met, that workflow is used. This ensures that only one workflow in the list of your defined workflows is started, even if several workflows have matching start conditions.
- Navigate to the details of a workflow.
- Activate or deactivate a workflow.
- Copy an existing workflow and modify it according to your requirements, or add a new workflow. You can configure the workflow as follows:
- Define properties such as a description and a validity period.
- Under the Preconditions section, choose, for example, a company code. This condition must be met for the workflow to start.
- Add one or more step sequences. For each step sequence, you define recipients and preconditions. You can define the order of the steps, and you can delete unnecessary steps.
- Use the feature Automatic Release of Purchase Contracts as an alternative option. By default, this workflow is activated.
The purchase contract gets approved automatically in the background when none of the preconditions in the active workflows are met and when automatic approval of the purchase contract has the Active status.
If a purchase contract is rejected, the current workflow is canceled. You can then make the required changes to the contract which starts a new workflow.
You cannot modify a contract while its status is In Approval. To apply your changes you need to withdraw the purchase contract that was sent for approval. Then make the required changes to it and resubmit it for approval.
- Supplier and buyer negotiation of target quantities for contracts, which are consumed by posting purchase orders against them
- Use of predictive analytics through which algorithms calculate the date on which the contract is likely to be fully consumed
- System notification to the responsible purchaser when the predicted date of consumption before contract expiry is near (configurable, default is 30 days)
In an increasingly complex and fast-paced world, Situation Handling helps you increase the quality and efficiency of your business processes. It does this by automatically detecting, tracking, and informing the right users about exceptional circumstances and issues that require their attention. The new Situation Handling-Extended framework allows you to create completely customized situations for specific business objects.
Purchase contracts are enabled for the Situation Handling-Extended framework, allowing you to tailor specific situations according to your needs. As a use case example, the expiration of purchase contracts is delivered as pre-defined situation handling template.
To learn more check out the Situation Handling - Extended Framework lesson.
SAP Fiori Apps
The following table lists the SAP Fiori apps that are used in the Purchase Contract - Create Purchase Requisition Process steps.
|Process Step||Business Role||Fiori App|
|Create Purchase Requisition (Standard)||Purchaser||Manage Purchase Requisitions - Professional (F2229)|
|Create Purchase Requisition (Outline Agreement)||Purchaser||Manage Purchase Requisitions - Professional (F2229)|
The following table lists the SAP Fiori apps that are used in the Purchase Contract (BMD) Process steps.
|Process Step||Business Role||Fiori App|
|Create Purchase Contract with reference to Purchase Requisition||Purchaser||Manage Purchase Requisitions (F1048)|
|Create Purchase Contract with reference to Contract Template||Purchaser||Manage Purchase Contracts (F1600A)|
|Mass Changes to Purchase Contracts||Purchaser||Mass Changes to Purchase Contracts (F2669)|
|Approve Purchase Contract (Optional)||Purchasing Manager||My Inbox - All Items (F0862)|
|Monitor Notification (Optional)||Purchaser||Notifications / Manage Purchase Requisitions- Professional|
|Print Purchase Contract||Purchaser||Manage Purchase Contracts (F1600A)|
|Generate Source Lists (Optional)||Purchaser||Manage Source Lists (F1859)|
|Process Purchase Requisition and Create Purchase Order||Purchaser||Manage Purchase Requisitions (F1048)|
|Review Purchase Documents by Requirement Tracking Number||Purchaser||Purchasing Documents by Requirement Tracking Number (F2905)|
|Approve Purchase Orders (Optional)||Purchasing Manager||My Inbox - All Items (F0862)|
|Monitor Contract Items (Optional)||Purchaser||Monitor Purchase Contract Items (F2423)|
|Monitor Contract Items (Optional)||Accounts Payable Accountant||Purchase Contract Items by Account Assignment (F2421)|
|Post Goods Receipt||Warehouse Clerk||Post Goods Receipt for Purchase Order (F0843)|
|Partial Reverse Goods Receipt (Optional)||Warehouse Clerk||Material Documents Overview (F1077)|
|Create Supplier Invoice||Accounts Payable Accountant||Create Supplier Invoice (F0859)|
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 contract management:
|Maintain Condition Type|
|Assign purch. organization to reference purch. organization||Define Mapping of Material Groups to Purchasing Group||Define Shipping Data for Plants|
|Organizational Structure||Plants||Purchasing Organizations|
|Purchase Contract Processing|
|Activate Flexible Workflow for Contracts|