The procurement

process
Objectives

 After completing this chapter, you will be able to:

 1. Describe the major organizational levels associated with the procurement
process.
 2. Discuss the four basic categories of master data that are utilized during the
procurement process.
 3. Explain the key concepts associated with the procurement process.
 4. Identify the key steps in the procurement process and the data,
documents, and information associated with these steps.
 5. Effectively use SAP® ERP to execute the key steps in the procurement
process.
 6. Utilize SAP ERP to extract meaningful information about the procurement
process.
Basic procurement process
ORGANIZATIONAL DATA

 Client
 Company code (CC)
 Plant
 Storage location (S Loc)
 Purchasing organization (P org)
 Purchasing group
Plant

 Many definitions or use. A location

 That holds valuated stock
 Where production planning is carried out
 Where products and services are created
 That contains service or maintenance facilities
 Factory, warehouse, distribution center
 Can be assigned to one CC only
 A CC can have many plants
Storage location

 A place, within a plant, where materials are stored

 Areas designated for different types of material (raw materials, work – in –process,
finished goods)
 More sophisticated divisions including storage bins, cabin trays
 A plant must have at least one storage location
 A storage location can belong to only one plant
Purchasing Organization

 Identify and select vendors

 Negotiate general conditions of purchase and contracts one or more plants or
companies
 Determine pricing conditions
 Typically, three models for purchasing organization
 Enterprise-Level
 Company-Level
 Plant-Level
Enterprise-Level purchasing organization

 Also know as cross-company code model

 One purchasing organization assigned to all CC in a client
 Purchasing for all plants across all CC
 Highly centralized – Corporate purchasing org
Company – Level Purchasing organization

 Also known as cross-plant model

 Different purchasing organizations are assigned to each CC
 Purchasing for all plants in one or more CC
Plant-Level purchasing organization

 Also known as plant-specific model

 Each plant has its own purchasing organization
 Highly decentralized
Reference purchasing organization

 One centralized purchase organization for high-level decisions across

enterprise
 Multiple CC-specific and plant-specific purchase org
Purchasing group

 A buyer or group of buyers responsible for certain material or groups of

materials
 Can be internal to the company or external
 Decide to purchase land, but use a realtor (external purchase group) to execute
the purchase
 Not assigned to our related to purchasing org
Master data

 Material master
 Vendor master
 Purchasing info record
 Conditions
Material master

 Data needed to execute transactions related to material

 Data are grouped by different user areas(views)
 Data are specific to (defined for) for different organizational levels
Material master - view

 Basic data
 Purchasing
 Accounting
 Forecasting
 Sales
 Plant/storage
 Work scheduling
 MRP
 Classification
 Warehouse management
Material master - views

 Basic data
 Description, unit of measure, weight, material group
 Purchasing
 Purchasing group, GR processing time, delivery (under/over) tolerances
 Accounting
 Currentcy, valuation class, price control
 Plant/ storage
 storage requirements
 Shelf life
 Weight, voulume
Vendor master

 Data needed to do business with vendors

 Data needed to execute transactions related to vendors
 Data are specific to different organizational levels. The three segments are:
 Client level data
 Company code level data
 Purchasing organizational level data
Data in the vendor master
Vendor – general data

 Client – level data

 Valid across all cc in a client
 Examples:
 Name,
 Address
 Communication
 Search term
Vendor – accounting data

 Company code specific data

 Valid for the entire company code across purchasing area
 Example:
 Account information
 Bank information
 Reconciliation account
 Payment terms and methods
 communication
Vendor – Purchasing data

 Separate for each purchasing organization

 Applies to the specified purchase org
 Examples:
 Partner functions
 InCoTerms: defines responsibilities and costs of shipments
 Freight, insurance, customers clearance, locations.
Purchasing info record

 Relates vendors and materials

 One info record per combination of vendor and material ( or material group)
 General data
 Conditions: Pricing, discounts, free goods
 Vendor data
 texts
Key concepts

 Item categories
 Account determination
 Stock type/ status
 Goods movement
Item categories

 Defines the process used to procure the item

 Categories:
 Standard
 Subcontracting
 Components provided; finished product received
 Consignment
 Liability only when withdrawn from stock
 Service
 Stock transfer
 Third party order
 Ship to third party; bill to us
Account determination

 Which GL account to assign to PO

 Defined in material master
 Account assignment categories
 Used when purchasing material without material master
 Assets, production order, cost center, sales, order, procurement
 Automatic GL account determination based on category
Stock types/ status

 Based on usability of material

 Unrestricted use
 In quality inspection
 Blocked stock (damaged, unusable, wrong delivery)
 Stock in transit
Goods movement

 A transaction that causes a change in stock

 Categories of goods movement
 Specific movement type
Goods movements

 Goods receipt
 From vendor or production process
 Increase in quantity and value of stock
 Goods issue
 To sales order or internal consumption
 Decrease in warehouse stock
 Stock transfer
 Physical movement of material between storage locations
 Sloc to sloc
 Plant to plant
 Cc to cc
Goods movements

 Transfer posting
 Results in a change in material status
 In –quality inspection/blocked/unrestricted use
 One material type to another

 May or may not include a change in location