Carrying out Procurement Activities in Networks

Objectives

After completing this lesson, you will be able to:

  • Explain procurement activities in networks

Account Assignment of Documents

Linda and James Talk About the Project Realization Phase

Note
The following video shows a dialog between Linda, project controller at Hybrid Machinery, and James, project planner at the same company. They discuss the project realization phase of the logistics project for the forklift:

Account Assignments of Documents During the Realization Phase for Logistics Projects

Various business transactions are available, that establish a connection to Work Breakdown Structure (WBS) elements or activities via an assignment. By assigning the appropriate documents, the commitment or actual costs can be posted directly to a WBS element, network or activity.

During the project planning phase, you can plan the costs for purchase requisitions, purchase orders, and goods receipts at the network or activity level using externally processed activities, service activities, or material components that are procured directly. Using internally processed activities, you can withdraw stock from the warehouse, post invoices using cost activities, and post costs arising as a result of confirmations.

Actual costs arising from purchase requisitions, purchase orders, goods receipts, or activity allocations are compared with planned costs from primary cost planning or activity input planning data for the network.

Procurement Processes

Discussion between James and Manuel About the External Procurement Process

James, the project planner, discusses the external procurement process with Manual from Purchasing. They talk about the process for external activities and also about the process for material components.

Note
See the following video to follow their conversation:

Procurement Process for External Activities and Material Components

Purchase requisitions are generated by the network for externally processed activities, service activities, and materials that are procured externally. These purchase requisitions are passed on to the purchasing department for further processing.

The purchasing process involves the following activities:

  1. Issuing a request for quotation to vendors (bid invitation)
  2. Entering these quotations in the system
  3. Selecting vendors
  4. Converting the purchase requisitions to purchase orders
  5. Monitoring the orders until goods receipt and invoice verification

A service activity triggers a similar purchasing process, but can also contain a hierarchy of planned services to be purchased and value limits for unplanned services.

Instead of goods receipt, service processing involves the following two steps:

  1. Entering services performed
  2. Accepting services performed

A purchase requisition results in purchase requisition commitments for the account assignment object (activity or WBS element). When the purchase requisition is converted to a purchase order, this results in purchase order commitments for the account assignment object (this is a different value type from purchase requisition commitments). Depending on the account assignment category of the purchase order, actual costs are posted when the goods or invoice are received. The actual costs are passed on to the network activity or WBS element, depending on the account assignment. Instead of having the network generate purchase requisitions automatically, you can create purchase requisitions and purchase orders manually and assign them to WBS elements.

How to Execute a Procurement Process for a Network

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