Overview of the Procurement Cycle 4.6fi_22.1 Procurement is a component of the Materials Management module that supports the purchase of materials and / or services by an organization from sources outside the organization. In keeping with the system’s Document Principle, the steps in the Procurement Cycle are represented by various documents, which are produced in both the Materials Management and Financial Accounting Modules. Chapter Objectives –Provide an overview of how the system supports an integrated Procurement Cycle. –Provide a description of the purpose and functionality of the documents created in the system in support of the Procurement Cycle. Chapter 22 Procurement Cycle and Documents

Overview of the Procurement Cycle 4.6fi_22.2 A/PGR/IR XX A/P X Cash X Purchase Requisition (MM) Purchase Order (MM) Goods Receipt (MM) Invoice Verification (MM) Vendor Payment (FI) Inventory X GR/IR X Procurement Cycle

Overview of the Procurement Cycle 4.6fi_22.3 PO GR Invoice Create, Display and change Vendor Master Records Display Vendor Account Balances Process Outgoing Payment Display / Change Vendor Line Items Create Vendor Invoices Manually Procurement & Accounts Payable Process Down Payment and Credit Memo Material Management FI Accounts Payable

Overview of the Procurement Cycle 4.6fi_22.4 Main Procurement Cycle Documents Purchase Requisition Request for Quotation Quotation Outline Agreements Contract Scheduling Agreement Purchase Order Goods Receipt Invoice Verification Vendor Payment

Overview of the Procurement Cycle 4.6fi_22.5 Materials Management Accounting GR Document Delivery Date Materials Quantity Values Account Postings IR Document Vendor Quantity Values Account Postings Goods Receipt Post Goods Receipt Invoice Verification Post Invoice Purchasing Save Order Document Order Document Vendor Delivery Date Conditions Materials Quantities Prices Documents in Materials Management

Overview of the Procurement Cycle 4.6fi_22.6 Purchase Requisition Internal Document Identifies demand for a product Authorizes Purchasing Department to procure Can be created automatically or manually Purchase Requisition

Overview of the Procurement Cycle 4.6fi_22.7 Request for Quotation Purchase Order Identify Vendor Process Requisition MRP Purchase Requisition Manual Creation Purchase Requisitions

Overview of the Procurement Cycle 4.6fi_22.8 Legal contract between Buyer and Vendor Purchase Order

Overview of the Procurement Cycle 4.6fi_22.9 Contract Purchase Requisition Another PO Vendor:1000 PO Create Reference RFQ Purchase Order (PO)

Overview of the Procurement Cycle 4.6fi_22.10 Purchase Requisition Reference RFQ Outline Agreement Vendor:1000 Vendor:2000 Vendor:3000 RFQ Create Request For Quotations (RFQ)

Overview of the Procurement Cycle 4.6fi_22.11 Comparison Vendor A$350/t  Vendor B$480/t  Vendor C$520/t  Average$450/t Vendor B, C Rejection Letter   Vendor 1000 Quotation for RFQ:1 Item:10 Gross Price:$400/t Discount:$50 Vendor 2000 Quotation for RFQ:2 Item:10 Gross Price:$400/t Surcharge:20% Vendor 3000 Quotation for RFQ:3 Item:10 Gross Price:$500/t Fixed Costs:$20 Purchase Order MatQtyPrice Steel 2t$350/t Vendor 1000 Info. Record Quotations

Overview of the Procurement Cycle 4.6fi_22.12 Release Order Delivery Schedule Contract Qty Total: Scheduling Agreement Contract $ Total: Outline Agreements

Overview of the Procurement Cycle 4.6fi_22.13 Create Requisition Request for Quotation Reference Contract Release Order Quantity March 1997 Contracts

Overview of the Procurement Cycle 4.6fi_22.14 Requisition Reference RFQ Reference Scheduling Agreement Vendor One-Time Vendor History Vendor Scheduling Agreement Delivery Schedule 1/30 3/30 5/30 Scheduling Agreements

Overview of the Procurement Cycle 4.6fi_22.15 Goods Receipt Vendor Buyer Goods Receipt (GR) Document

Overview of the Procurement Cycle 4.6fi_22.16 GR/IR Clearing Stock Inward movement on goods receipt Posting a Goods Receipt

Overview of the Procurement Cycle 4.6fi_22.17 Goods Receipt PO Invoice Verification Invoice Open Items Materials ManagementFinancial Accounting Invoice Verification

Overview of the Procurement Cycle 4.6fi_22.18 GR/IR Clearing Stock Vendor Goods Receipt Invoice Receipt (Invoice Verification) Posting the Invoice

Overview of the Procurement Cycle 4.6fi_22.19 Purchase Order Goods Receipt Invoice Posting Payment MM FI Payment in the Procurement Cycle

Overview of the Procurement Cycle 4.6fi_22.20 Manual Payment Program Vendor A Vendor BVendor C Invoice In CheckBank Transfer OR Invoice In Invoice InInvoice Payment Processing

Overview of the Procurement Cycle 4.6fi_22.21 PAYMENT (Manual or via Payment Program) Create a Vendor Payment Document Clear the Vendor Open Item Create a Payment Form Post to Vendor Account Post to G/L Accounts Payment Processing Results

Overview of the Procurement Cycle 4.6fi_22.22 Stock Material with Material master record GR Time to STOCK ACCOUNT Receive into Stock Consumable Material (Non-Stock) ACCOUNT ASSIGNMENT ?? ACCOUNT ASSIGNMENT ?? Enter Account Assignment Category Automatic Account Assignment from Material Master Data Manual Account Assignment - User Must Enter Account Data GR Time to CONSUMPTION or ASSET ACCOUNT Account Assignment Category

Overview of the Procurement Cycle 4.6fi_22.23 Account Assignment Categories Create Order Document Asset Sales Order Customer Requirements Production Order Project Project - Make to Order Unknown All Auxiliary Account Assignment ACEFPQUXACEFPQUX KCost Center

Overview of the Procurement Cycle 4.6fi_22.24 A/P X Cash X Purchase Requisition (MM) Purchase Order (MM) Goods Receipt (MM) Invoice Verification (MM) Vendor Payment (FI) Inventory X GR/IR X A/P GR/IR XX (FI) Procurement Cycle

Overview of the Procurement Cycle 4.6fi_22.25 Materials Management Documents Chapter Summary Key Terms –Procurement Cycle –Materials Management Documents –Order Document –Purchase Requisition –Request for Quotation –Purchase Order –Quotations –Outline Agreement

Overview of the Procurement Cycle 4.6fi_22.26 Materials Management Documents Chapter Summary Key Terms –Contract –Scheduling Agreement –Goods Movement –Goods Receipt –Invoice Receipt –Invoice Verification –Payment Program –Account Assignment Category