Procurement of direct materials refers to the process of acquiring the necessary raw materials, components, and supplies directly from suppliers to support the production of goods or services. This process is crucial for businesses that rely on a steady supply of materials to meet their production demands.
The procurement of direct materials in SAP S/4HANA typically involves several steps. Firstly, the procurement team identifies the specific materials required for production based on the production plan and inventory levels. This involves analyzing the demand forecast, considering lead times, and evaluating supplier capabilities.
Once the materials have been identified, the procurement team initiates the sourcing process. This involves identifying potential suppliers, requesting quotes or proposals, and evaluating supplier capabilities, quality standards, and pricing. The team may also negotiate contracts or agreements with selected suppliers to ensure a stable supply of materials under favorable terms.
After selecting the suppliers, the procurement team places purchase orders for the required materials. This involves specifying the quantity, delivery date, and any other relevant terms and conditions.
This purchasing process uses purchase requisitions that are generated either by the Material Requirements Planning (MRP) process or manually by a requester. The conversion from a purchase requisition to a purchase order can either be done manually (in case adoptions are necessary) or automatically (applicable for large volumes). Alternatively, the purchase orders can be generated manually.
The purchase order can be subject to approval before being issued to a supplier. Goods are shipped from the supplier and the goods receipt is created with reference to the corresponding purchase order. Subsequently the invoicing process is triggered. The purchasing user can monitor the progress throughout the entire procurement process and can initiate reactive actions if needed.
Key Process Flow
- Manage purchase requisitions
- Manage purchase orders
- Manage goods receipts
- Manage stock
- Manage invoices
- Manage down payments
Business Benefits
Streamline procurement processes in an efficient and cost-effective manner:
- Ensure highly automated processes for the procurement of direct materials
- Reduce manual effort greatly
- Monitor the procurement progress in real-time
- Use an analytical list page to monitor purchase order items
Play the video to watch an overview of the procurement process for direct materials in SAP S/4HANA.