Outline Agreement

“These are short term and long term and long term agreements with the vendor to supply
goods and services under certain conditions”

Vendor selection is an important process in the procurement cycle; vendor can be selected by
quotation process. After getting shortlisted a vendor, an organization enters into an agreement
with that particular vendor to supply certain items with conditions. Typically when the
agreement reached with that particular vendor, a formal contract is signed with the vendor. So
the outline agreement is a long-term purchasing with vendor

The key points to taken care about outline agreement here

An outline agreement is a one-term purchasing agreement with a vendor containing terms and
conditions regarding the material that is to be supplied by the vendor.

The terms of outline agreement are valid up to certain period of time and cover a certain
predefined quantity or value.

Outline
Agreement

Scheduling
Contract
agreement

Value Quantity Without With release

(WK) (MK) release (LP) (LPA)
Business scenario

Before  I had one plant Z005 with one purchasing organization i.e. (Z005) and I had a
requirement of materials (464802, 464804) on weekly basis with certain price from vendor
(101046) is supplying me that material from one year.

Now  I have been expanded my business and I have total three plant now i.e. (Z005, Z006,
Z007), with one Purchasing organization (Z005) means I have centralized purchasing
organization,

I want material (464802, 464804) for all three plants and so in this case I am going to
negotiating with vendor, because I have increased volume so I could negotiate with vendor to
reduce the price by saying that I am going to procure material with a quantity 4 times more
than before.

Then the vendor could offer me to make an agreement for a year or six month with better
terms, with better shipment service, better packaging, better price etc. that will be beneficial
for vendor and I too.

So I will create I contract with the vendor for 1 year.

Before VENDOR 101046

Plant T020
Total
sr.no. Material Monthly Requirement Price
Qty Total Value
1 464802 1200 196
14400 2592000
2 464804 1200 200
14400 2880000

Purchasing Org-T010

Now
Validity Period 27/06/2021-27/06/2022

T010
Plant T020
Total
T030
Qty Total Value
sr.no. Material Monthly Requirement Price
43200 6480000
1 464802(MK) 1200/Plant 150
2 464804(WK) 1200/Plant 180 72000 12960000
Quantity Contract: The total value of
As per business Requirement I am going to create now a quantity based contract with decided
vendor.
T-CODE: ME31K/32K/33K (Create/Change/Display)

Quantity type contract

I have entered here my centralized

purchase organization where my all
three plants are assigned.

I am not going to put plant here

because it will be than only
plant specific and I want this
contract for my three plants. I’ll
going to decide it in PO.

Header data: It includes all contract related data like company code, validity period, we can
also mention approximate value under the contract also we can decide terms of payment
agreed with vendor.

As I decided contract
for one year I enter
validity period here

In case quantity
contract it is not
mandatory to put
value
 Quantity all three plants

Quantity contract saved

If Purchase order (ME21N) for that material without reference to contract

2) In this case system is showing me the price

from info record which is not the negotiated
price, which could be loss to company.

1) If I try to make a PO without reference to

contract system will show me this type error.
message
Purchase order (ME21N) with reference to contract

I’ve create PO with reference to

outline agreement tab than all the
data automatically gather by system
in PO.

I’ve entered my three

plants here for same
material.
Goods Receipt (MIGO)

How many PO are

released under this
contract.

Here we can see how much qty is

release under this contract
Value contract (WK)
As per business Requirement I am going to create now a Value based contract with decided
vendor.
T-CODE: ME31K/32K/33K (Create/Change/Display

In this case I’ve create contact with reference to the purchase requisition.

But in this case we need to specify the plant

otherwise we can’t proceed further. Then the
contract will be plant specific only.

Here I have created contract with reference to purchase requisition

Header data: It includes all contract related data like company code, validity period, we can
also mention approximate value under the contract also we can decide terms of payment
agreed with vendor.

In value type contract this

field is mandatory

Target quantity and net price must be specifying here.

Purchase order with reference to Value and Quantity contract both in the same PO

Now I want to create purchase order with reference to

value and quantity contract for a different plant, I can
do that but vendor and p. org must be same.

My plant and contract are different

but vendor and purchase
organization is same.

Material of different contract

 Scheduling Agreement
“An agreement between vendor and ordering company to deliver the predefined material at
predefined dates within a timeframe is known as scheduling agreement.”

In case of contract we tell the vendor specify the vendor target quantity OR A target value, but
what is I have requirement of material on weekly at particular date of a week in that case with
replacement of contract we can do scheduling agreement with the vendor by specifying the
actual date and quantity.

In this case want material (464810) and I required this material on weekly basis at particular
date.

To avoid any delay in order and save my time from creating PO on weekly basis I will create
scheduling agreement.

STEP 1
Create scheduling Agreement
We have without release (LP) and with release (LPA)
T-CODE: ME31L/32L/33L (create/change/display)

With release

NOTE: For this document I am showing you only with release (LPA) only the difference in
without release we no need to release the document it releases automatically with date.
In case of scheduling agreement enter
plant is must, because plant required
that material at particular schedule.
STEP 2: Maintain Scheduling agreement we need to maintain it as per date of delivery and
quantity.

T-CODE: ME38

Here I have maintain date of delivery

with quantity

Verify Purchase order ME21N from document overview.

It fetches all the details as per

scheduling agreement

Our Scheduling
Agreement but we
can’t generate here
it’s just for verify
STEP 3

Now I have to release it as per requirement.

T-CODE: ME84

Thanks & Regards,

Akash Hiwale
akashhiwale20@gmail.com