The Procurement Process The Procurement Process
ObjectivesObjectives
DescribethebasicbusinessprocessofprocuringstockmaterialsinanERPSystem.
DiscusstheintegrationpointsinprocurementtoFinancialAccountingandInventoryManagement.
DiscussthereportingandanalysistoolsusedbyR/3intheprocurementcycle.
Hierarchical Enterprise StructureHierarchical Enterprise Structure
Client• highesthierarchylevel,e.g.groupwithitsdaughtercompanies• Settingsmadewillaffectallcompanycodes
Company Code (FI)• Org.Unitcanpresentabalance sheetaccording to the legal
provisionslegallyindependententerprise• Settingsmadewillonlyaffecttherespectivecompanycode
Purchasing organization• procuresmaterialorservicesfortheassignedplants• negotiatesonterms&conditionswithvendorsmakecontracts• isresponsibleforallthepurchaseprocesses• operativepurchasingisdonebypurchasing groups
Plant• Operational facilitywithinacompanycode(e.g.factory,store,...)• hasitsownrequirements planningandinventory management
Storage location• aspaceforlogicalinventorymanagement
S H
18.000
3.283
137
12.248
18.000
3.283
12.137
1.248
12121323 12121212
S H
18.000
3.283
137
12.248
18.000
3.283
12.137
1.248
12121323 12121212
S H
18.000
3.283
137
12.248
18.000
3.283
12.137
1.248
12121323 12121212
S H
18.000
3.283
137
12.248
18.000
3.283
12.137
1.248
12121323 12121212
Purchasing organizationPurchasing organization
purchasinggroupMG0,3purchasinggroupMG0,3purchasingorganization
purchasinggroupMG1,4purchasinggroupMG1,4
purchasinggroupMG2,5purchasinggroupMG2,5
purchasinggroupMG7,8,9purchasinggroupMG7,8,9plantplant
purchasinggroupMG6purchasinggroupMG6
material group
Inventory Management with a Warehouse Inventory Management with a Warehouse Management SystemManagement System
client
00010001plant
storage location
001001warehouse number
001001storage type
05-04-0305-04-03
002002
05-04-0405-04-04storage bin
MMMM
WMWM
company code
0001 – ABC inc.0001 – ABC inc.
0001 – Jones inc.0001 – Jones inc. 0002 – Model Ltd.0002 – Model Ltd.
purchasing organization
00010001
00010001 00020002 00030003
00020002 00030003 00040004 00010001
00020002 00030003 00040004
distrib.-center factory
(physical stock)
The Module MM – Main FunctionsThe Module MM – Main Functions
Maintenanceofthematerialmaster record(differentviews) Materialrequirements planning Materialprocurement:handlingofthedocumentsfor purchaserequisition request,quotation vendorselection purchaseorder,outlineagreement vendormasterrecord
Inventory management goodsmovement,materialvaluation
Invoice verificationreferringpurchaseorders,goodsreceiveddocuments,deliverynotesetc.
MM – interdependencies to other modulesMM – interdependencies to other modules
MM
materialmaster
purchasing
requirementsplan.
inventorymgmt.
invoiceverification
MM
materialmaster
purchasing
requirementsplan.
inventorymgmt.
invoiceverification
SDsalesanddistrib.
SDsalesanddistrib.
PMplant
maintenance
PMplant
maintenance
QMquality
management
QMquality
management
PPproductionplanning
PPproductionplanning
Logistics
FIfinancialacc.
FIfinancialacc.
COcontrolling
COcontrolling
AMfixedassetsmgmt.
AMfixedassetsmgmt.
Basic DataBasic Data
Masterrecords-includeinformationabout1. vendors2. materialandservicestobeprocured3. therelationbetween1.and2.(purchasing info record)e.g.prices/termsandconditions
billsofmaterialfor productionplanning
purchasing
salesanddistribution
withdrawalofMaterial
• invoiceentry• invoiceverification• paymenthandling
• invoiceentry• invoiceverification• paymenthandling
• requestforquotation• quotationprocessing• purch.orderhandling
• requestforquotation• quotationprocessing• purch.orderhandling
Structure of the Vendor Master RecordStructure of the Vendor Master Record
Generaldata• name• address• controldata
Generaldata• name• address• controldata
accountingdata• bankaccount• acc.maintenance• payment
accountingdata• bankaccount• acc.maintenance• payment
purchasing• termsandcond.• partnerfunctions• currency
purchasing• termsandcond.• partnerfunctions• currency
utilizationutilization
foreachpurchasingorganization
foreachpurchasingorganization
clientwideorforeach
companycode
clientwideorforeach
companycode
clientwideclientwide
areaofvalidityareaofvaliditysectionssections
Views on the Material Master RecordViews on the Material Master Record
each view is maintained by a certain user department of the firm
accounting: valuation- and calculation-specific information requirements planning: information about material requirements
planning (e. g. reorder point) purchasing: e. g. responsible purchasing group, order unit engineering: technical information storage: information about warehousing, material movements, ... forecast: information about the forecasting of the material requirements S & D: informationen about sales orders and price determination
purchasing info recordpurchasing info record
inforecordinforecord
pricesterms&cond.POstatisticstolerancelevels
date
pricesterms&cond.POstatisticstolerancelevels
date
quotation
order
outlineagreement
ProcurementProcurement
TheprimarySAPR/3applicationmodulesthatsupporttheProcurementprocessare: MaterialsManagement
Purchasing GoodsReceipts InvoiceVerification
ProductionPlanning PurchaseRequirements
FinancialAccounting PaymentProcessing MaterialsValuation
Sales &Distribution
MaterialsMgmt.
ProductionPlanning
FinancialAccounting
Controlling
Fixed AssetsMgmt.
QualityMgmt.
PlantMaintenance
HumanResources
Workflow
IndustrySolutions
R/3Client / Server
ABAP/4 ProjectSystem
outlineagreem.
PO
Purchasing ProcessPurchasing Process
MM
X X X
X X
determination:requirements
X X X
X X
determination:sourceofsupply
vendor 1vendor 1
vendor 2vendor 2
vendorselection
vendor
PO
PO
purchaseorderprocessing
POmonitoring
goodsreceived&inventorymgmt.
PO invoice?=
invoiceverificationinvoiceverification
?
Procurement CycleProcurement Cycle
Theprocurementcyclemayconsistofeightprocesses:
8. Payment
3. Requisition assigned to a Vendor
5. Order follow-up
2. Source determination
1. Requirements determination
4. Order processing
PurchaseOrderPurchaseOrder
6. Goods receipt and inventory management
PurchaseOrderPurchaseOrder
7. Invoice verification
Business Process Flow for ProcurementBusiness Process Flow for Procurement
ThemaindocumentsandtransactionsintheProcurementprocessare:
Planning, Reporting, and Analysis
Purchase Requisition
Purchase Order
GoodsReceipt
InvoicePosting
Note:Paymentstovendorsareusuallymadeatspecifiedtimes(e.g.attheendofthemonth).
Paymentamountsaredeterminedaccordingtothe‘open’invoicespostedonthesystem.
Purchase Requisition ProcessingPurchase Requisition Processing
Material ResourcePlanning
Direct Entry
Determine source of supply
Purchase requisition Release strategy
PurchaseOrderPurchaseOrderPurchaseOrder
Purchase order
or
Purchase OrdersPurchase Orders
Apurchaseorderisaformalrequesttoavendortoprovidecertainmaterialsorservicesunderspecificconditions(quantity,price,deliverydate,etc.)
Planning, Reporting, and Analysis
Purchase Requisition
Purchase Order
GoodsReceipt
InvoicePosting
Create Purchase Order (PO)Create Purchase Order (PO)
1
vendorknown
purch.ordervendor 2vendor 2
2
vendornotknown
terms&cond.
outlineagrement
sourcelist
vendor
inforecord
3
assignedpurchaserequisitionexists(fromuserdepartment)
purch.req.vendor 2vendor 2
purch.order
purch.order
Purchase Order ProcessingPurchase Order Processing
PurchaseOrderPurchaseOrderPurchaseReq.
ServiceConsumable material
Stock material Account assignment(cost center, asset,
project…)
PurchaseOrder
• Standard• Sub contract• Consignment•Third-party
PurchaseOrder
• Standard• Sub contract• Consignment• Third-party
Statistics
Order History
Direct Entryor PurchaseRequisition
Goods ReceiptGoods Receipt
Whengoodsarereceivedfromapurchaseorder,theitemdataiscopiedfromthepurchaseorderintothegoodsreceiptdocument.
Planning, Reporting, and Analysis
Purchase Requisition
Purchase Order
GoodsReceipt
InvoicePosting
Goods Receipt for Stock MaterialGoods Receipt for Stock Material
Enteringthegoodsreceiptincreasestheinventorylevelofamaterialthatisprocuredforstock.
InventoryManagement(MMmodule)controlsandrecordsallgoodsmovement,formpurchaseorderreceiptthroughtheplant,toconsumption
Purchasingdocuments
Items1.2.3. Warehouse / storesGoods
Receipt
Vendor
Results of a Goods Receipt PostingResults of a Goods Receipt Posting
Transactiondocumentsarecreatedbothformaterialsmanagementandfinance.
Goods ReceiptPosting
Accountingdocument
Stock quantityConsumption statistics
Point of consumptionCost center Order
TransferOrder
Purchasing data:Order item, Order history
Goods receiptslip
Materialdocument
G/L accounts:Consumption account
GR/IR account
Posting an Order Entry (Goods Receipt)Posting an Order Entry (Goods Receipt)
MMMM
Logistics
purchasing req.planning
inventorycontrolling
invoiceverification
goodsreceipt
inventorymgmt.
goodsissue. transferposting
SDsalesanddistrib.
SDsalesanddistrib.
PMplant
maintenance
PMplant
maintenance
QMquality
management
QMquality
management
PPproductionplanning
PPproductionplanning
FIfinancialacc.
FIfinancialacc.
COcontrolling
COcontrolling
AMfixedassetsmgmt.
AMfixedassetsmgmt.
Invoice ProcessingInvoice Processing
ThislaststepintheprocurementprocessincludesinvoiceverificationandupdatingaccountspayableintheFImodule.
Planning, Reporting, and Analysis
Purchase Requisition
Purchase Order
GoodsReceipt
InvoicePosting
Paymentwillthenbemadelaterbaseduponthe‘open’invoicespostedonthesystem
Invoice VerificationInvoice Verification
inputinformationinput
information invoiceverificationinvoiceverification outputinformationoutput
information
ordersactions:
• enterinvoice• verifyinvoice• postinvoice• updaterelevantdata• (re-editinvoice)
goodsreceipt
master data:materialvendorsaccounts
terms&cond.
financialaccounting
assetmanagement
costaccounting
Invoice Verification EnvironmentInvoice Verification Environment
Invoiceverificationaccessesdatafrompurchasing,inventorymanagement,materialmaster,andvendormasterfiles.
PurchaseOrder
VendorInvoice
GoodsReceipt
PurchaseOrderPurchaseOrder
Invoiceverification
G/L accounts
Assets
Cost centers
Projects
Orders
Material master
Vendor master
Posting an invoice in the R/3 System updates purchasing and accounting data
Posting an invoice in the R/3 System updates purchasing and accounting data
Vendor PaymentVendor Payment
Accountspayablereadstheinvoicefileandpaysallpostedinvoicesdue.(Paymentrunscanbeautomatedtooccuratspecifictimes.)
Motor Sports International1234MainStreetNewYork,NY10181
1 4 4 9
Date_______________
Payto:________________________________________
________________________________________________________
_______________
1293039040202020202109231449
_________________
Vendor
1000
Bank
1000Paymentprogram
Paymentprogram
ReleasedInvoice
FinancialAccounting
Procurement IntegrationProcurement Integration
Purchase Order
Goods Receipt
Invoice Verification
PP FI FI
MM
PurchaseOrder
Invoice
Reporting and AnalysisReporting and Analysis
StandardReportingprovidesListDisplays(pre-definedprograms)by: Vendor Material Accountassignment Materialgroup Purchaseordernumber Trackingnumber
GeneralAnalysis OrderValueAnalysis InventoryTransactionAnalyses
Logistics Information System (LIS)Logistics Information System (LIS)
TheLogisticsInformationSystem(LIS)containsseveralinformationsystemssuchas: PurchasingInformationSystem InventoryControlling SalesInformationSystem ShopFloorInformationSystem
LISextractsitsdatafromtheoperativeapplications;itoffersmanydifferentviewsonthisinformation.
Logistics Information System (LIS)Logistics Information System (LIS)
TheLISexistsfortheentirelogisticssysteminR/3 TheLIScontainsseveralinformationsystemssuchas: SalesInformationSystem PurchasingInformationSystem
TheLISextractsdatafromtheoperativeapplications;offeringitinmanydifferentviews,thedepthofwhichisdeterminedbytheuser.
InventoryControlling ShopFloorInfoSystem
SalesInformationSystem
PurchasingInformationSystem
InventoryControlling
Shop FloorInformationSystem
MaintenanceInformationSystem
Quality MgmtInformationSystem
Sales andDistribution
(SD)
MaterialsManagement
(MM)
ProductionPlanning
(PP)
PlantMaintenance
(PM)
QualityManagement
(QM)
Logistics Information Library
R/3
LogisticsInformation
Systems
LogisticsProcessing
Systems
In Summary In Summary (important) (important)
Thebasicprocurementprocessincludes: Purchaserequisition Purchaseorder
Procurementmasterdataincludesthevendorandmaterialmasterfiles. AtvarioustimesduringtheProcurementprocess,integrationoccursbetweenthePP,MMandFImodules.
Thetworeportingtoolsusedintheprocurementenvironmentare: StandardReporting
ListDisplaysGeneralAnalysisInventoryAnalysis LogisticsInformationSystem
PurchasingInformationSystemInventoryControllingSystem
Goodsreceipt Invoiceprocessing
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