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Outlining Purchasing Agreements in SAP S/4HANA

Objective

After completing this lesson, you will be able to outline the usage of purchase agreements in SAP S/4HANA.

Purchasing Agreements in SAP S/4HANA

Purchasing agreements in SAP S/4HANA refers to the long-term arrangements made between a company and suppliers for the supply of materials or services over a certain period of time. They include contracts and scheduling agreements.

In SAP S/4HANA, there are two ways of using purchasing agreements:

Purchasing contracts
Scheduling agreements

Purchasing contracts are long-term outline agreements with suppliers regarding the supply of materials or provision of services over a certain period of time.

Purchasing contracts can be based on quantity or value.

In quantity contracts, the total quantity of each material to be supplied over the duration of the contract is specified.
In value contracts, there is an overall contract value limit, but the supplies can consist of a variety of materials or services.

Scheduling agreements are also long-term agreements, but they include quantities and delivery dates. Typically, a schedule line is created for each delivery, providing the specific quantity and date/time for the upcoming delivery.

Flowchart illustrating procurement processes. It is divided into two sections: ‘Contracts’ and ‘Scheduling Agreements.’ Each section contains boxes detailing contract or agreement numbers, validity periods, materials, quantities, and scheduling types

Key Features of Purchasing Agreements in SAP S/4HANA

Purchasing agreements in SAP S/4HANA include the following key features:

Pricing Conditions: You can maintain agreed prices and discounts for contracts, with the option to maintain these conditions at the header or item level.

Release Orders or Scheduling Agreement Releases: Contracts don't include specific delivery dates or quantities. When materials or services are required, a release order (purchase order) is created against the contract. In contrast, scheduling agreements have delivery schedules specifying delivery quantities and dates.

Validity Period: Purchasing agreements have a defined start and end date to ensure the conditions are only valid during the specified period.

Document Overview: The system provides an overview of all purchasing documents related to an agreement, enabling you to track the use of the purchasing agreements

Output Management: System provides you with a range of options for managing your documents. You can easily print contract documents, send them via email, or transmit them using cXML format directly from the system.

Workflow - contract approval possibility: The flexible workflow feature enables the creation of customized approval processes based on specific conditions. Approvers can be assigned based on their role or as individual users or teams.

Overall, purchasing agreements in SAP S/4HANA provide a means to streamline procurement processes, improve supplier relationships, and achieve cost efficiencies.

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

Contract: Contract release order (Purchase Order).
Scheduling Agreement: Delivery schedule.

Differences Between Contracts and Scheduling Agreements

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

The volume of documents:

As a rule, in the case of a contract, 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 such 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.

How to Create a Quantity Contract

In this demo, you see the basic steps involved in creating a contract using the Manage Purchase Contracts app, which is available from the SAP Fiori launchpad.

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