Outlining a General Procurement Process

The external procurement of materials or services is based on a cycle of different activities.

The following video provides an overview of the typical steps in an external procurement process.

In detail, the typical external procurement process includes the following steps:

1. Requirement determination

   A purchase requisition informs the purchasing department of the need to procure a material or service.

   A purchase requisition can be created manually or automatically (for example, by an MRP run) in the SAP system.

2. Source of supply determination

   The second step is to identify a supplier from whom the required material or service can be procured.

   As a purchaser, you are supported by the system when determining sources of supply. You can access purchase orders, outline agreements, and purchasing info records that already exist in the system. You can also create requests for quotation (RFQs) to determine a supplier.

3. Purchase order processing

   Once a source of supply has been determined for the requirement, the purchase requisition can be converted into a purchase order. This step can be done manually or automatically.

4. Goods receipt entry

   For this step, a distinction must be made between the procurement of materials and the procurement of services.

   • If an ordered material is delivered, a goods receipt with reference to the purchase order must be posted for this delivery.

   • If an ordered service is provided, a service entry sheet with reference to the purchase order must be created and accepted.

   The reference to the original purchase order reduces the manual entry effort, as the item data is proposed from the purchase order. The user who enters the document can therefore also check whether the goods delivered or services provided match the values agreed in the purchase order.

5. Invoice entry

   The second-last step of the procurement process is the receipt of the supplier invoice and the entry and verification of this invoice in the system.

   Like the goods receipt, the invoice is entered with reference to the corresponding purchase order. Alternatively, reference can be made to the delivery or service entry sheet during invoice entry. By creating this reference, the system can alert the invoice verification clerk to price or quantity variances in the invoice, for example.

   As with the goods receipt, invoice entry updates the purchase order history.

6. Payment processing

   At the end of the procurement process, the supplier liability resulting from the invoice entry is paid. This is usually done through the payment program. The regular execution of this program is the task of Financial Accounting and is not discussed further in this e-learning.

The process flow is documented in the purchase order item. This allows you to evaluate the preceding and subsequent documents for a document.

For example, in a purchase order item, you can see whether it was created with reference to a purchase requisition, a supplier quotation, or without reference. You can also see from the process flow whether goods receipts, return deliveries or invoices have been entered for a purchase order item.

The following video introduces you to the departments that can be involved in the external procurement process.

Summary of the Departments, Tasks, and People:

The table gives an overview of the departments that may be involved in an external procurement process. It also lists the employees and their tasks, which you will get to know better in this e-learning.