Rhon Ryan D.

Tamondong
AC 501

1.  What is procurement? Discuss its connection with other business functions, especially
accounting. 
Procurement focus more on the strategic process of products or service sourcing, procurement
involves acquiring goods and services, in the field of finding and agreeing to terms. It may work
from external sources often through competitive bidding. It simply means choosing properly
vendors which offer the most effective and efficient terms and conditions in the contract in
acquiring the parts and materials needed.
 Procurement and Design engineering
The Design engineering influences the amount of time Procurement has to handle a
procurement assignment. It has the initial responsibility for the technical specification of
products and materials needed for production. To work out effectively it must have the
constant help of Procurement and Production. Organization have initiated early
procurement and involvement of supplier to help in the effort.
 Procurement and Sales
Organizations miss the leaks in profit that may occur if the sales activity is not
properly engage with the Procurement and Production activities. An adjustment in the
estimate include the changes organization expects in the future sales. The swift
communication of changes to Production and Procurement permits these functions to
modify their schedule economically as possible. Procurement must immediately be
communicated to Sales information concerning increase in the prices of materials. It allows
sales to evaluate the effect of a higher price given for future sales quotations, on current
selling process and other plans for future product lines.

 Procurement and Production

The Procurement and Production relationship starts when Production function
transmits its manufacturing materials requisition to the Procurement function. The most
difficult problem is the Procurement timing faced when render the documents into
Procurement. When Procurement has inadequate time to negotiate properly, higher prices
are guaranteed to be paid for materials needed. The costly special production runs and
premium transportation cost are the factors that frequently result from lack of Procurement
lead time.

 Procurement and Finance / Accounting

The significance of a good financial planning is highlighted which one factor that can
make the business successful. Basic facts needed by a company for planning of its working
capital and cash flow positions are accurate procurement schedules and accurate sales
forecasts. It is important for Procurement to translate changes in schedule to Finance and
other departments.
Regardless of the prices therein, the right time to but from the state of business
conditions might not be the right time in the standpoint of company’s treasury. Rapid
payment to suppliers is the key factor to have a good supplier relationship. During materials
shortage, an organization with preferred customers has an advantage to avoid shortage
problems. A cooperative relationship between Procurement and Finance/ Accounting can
impact the development of good supplier relation.
2. What could be the difference between a manual procurement cycle and one done through an
ERP? Discuss. Site some advantages and disadvantages.
In the Manual Procurement Process the function was usually managed manually the paper
works as well as phone calls and in-person conversation. In line with this, the goal was to fulfill all
the goods that are needed to obtain the right price, right quantity and right time. It was the key to
the company’s financial and operational success, repetitive tasks and time consuming that failed to
contribute savings or profit. In Manual Procurement it considers process of short-term purchasing
rather than an integral component of business operations where in ERP Procurement it values the
strategic approach that can bring more profit. The ERP Procurement leads to a unified digital
platform and speed up all source-to-pay operations, creating broad opportunities to inclined more
savings and value in the procurement process.
Advantage of Manual Procurement
a. Unnecessary extensive education and training for software is not needed
b. Person to person communication and verification
c. Unnecessary research is not needed
Disadvantages of Manual Procurement
a. Repetitive tasks
b. Costly process
c. Time Consuming
d. Process Delay
e. Miscommunication
f. Error Handling
g. Reporting Difficulties
h. Document Control
Advantages of ERP Procurement
a. Efficient Operation
b. Increase in Transparency and Visibility
c. It boosts in Compliance with external partners
d. Increase Savings and Values
e. Enable to Focus on Strategic Work
Disadvantages of ERP Procurement
a. Culture Shock - Reluctant to move beyond traditional models
b. Situation-Specific Integration Issues
c. Challenge in Education and Training
d. Challenge in Research and Planning

3. What is a Purchase Requisition? Discuss.

Procurement in every organization begins in gathering important requirements.
After all the requirements are gathered, we need to inform the purchasing department. A
Purchase Requisition is a company’s formal document that is a request to the purchasing
department for the procurement of certain lists of materials needed. It needs the approval
from the purchasing department. It is an internal document and compiled in the documents
 of an organization. Purchase requisition may be created for the following procurement;
standard, subcontracting, consignment stock transfer and external services.

4. What is a Purchase Order? How does it affect inventory levels?

Procurement begins in creating purchase order which is a company’s formal
document that is given to suppliers or vendors and it includes the list of materials or
merchandise that are to be acquired. So, simply put purchase order can be created for
different types of procurement. There are four types of purchase order; subcontracting Po,
Consignment PO, Stock Transfer PO and Service PO. Using Purchase Orders provide
accurate documentation of what has been ordered. It provides the list of quantities, item
description, prices instructions, discounts and delivery date. By using purchase order will
give you a sight into stock levels, reorder levels, stock on hold and free stock. In addition to
costs and sales, you can see the profit margin of your products.
5. What is a Goods Receipt PO? How does it affect inventory levels?
Good Receipt is the physical movement of merchandise or materials into the
warehouse. It is a good movement used to post materials received from the external
vendors or suppliers or from in-plant production. All goods receipts result in an increase of
the stock in the warehouse. These are the kinds of goods receipts are to be considered;
Goods receipt with reference to purchase order, goods receipt with reference to production
order, goods receipt with reference to a delivery and other good receipts without reference.
When goods are received, the process places in the warehouse management system which
is automatic that is transparent to its users. Warehouse management record all the
transactions that take place that is associated with stock. From posting the receipt of goods
in the Inventory Management to confirm that the movement has taken place.
6.  Explain the nature of Goods Return.
The goods return document is used to converse a purchasing transaction or
returning delivered goods for an item partially or completely. Due to legal stipulations,
users cannot delete or make accounting relevant changes to these documents. User can
create a goods return, to return faulty or unwanted goods to correct the errors the user
made. When the user creates a goods return, the materials are issued from the warehouse
and quantities are reduced. No A/P invoice has been created for the goods returned. If
invoice has been created, one must create an A/P credit memo.
7. What is an A/P Invoice? Discuss. 
The A/P Invoice is a request for the payment. It records the cost in profit and loss
statement. A/P invoices allows the user to create relevant posting in the accounting system
only and do not affect inventory and inventory values. The user cannot change any
accounting relevant data in the A/P invoice because it is a company’s legal document that
generates entries in the general ledger. The user may create an A/P invoice from multiple
goods receipt POs and purchase orders.