1. MM - Purchasing

2. Target Group Purchase department Notes to the user
The training materials are not teach-yourself programs. They complement the course instructor’s explanations. Your material includes space for notes.

3. Introduction Contents Purchasing overview Purchase requisitions
Request for quotations
Outline agreements
Exercises
Solutions

4. Course Objectives
At the conclusion of this course you will be able to:
To understand the concepts in SAP - Purchasing component
To Create or change PRs
To create, change or compare RFQs
To create contracts

5. Purchasing - overview
The Purchasing component has the following tasks:
external procurement of materials and services
determination of possible sources of supply for a requirement identified by the materials planning and control system
determination of possible sources of supply for a requirement arising directly within a user department
monitoring of deliveries and payments to vendors

6. Purchasing - integration with other modules
Controlling (CO)
Purchase orders for materials intended for direct consumption
They can be directly assigned to a cost center or a production order.
Financial Accounting (FI)
Vendor master is maintained by both accounting and purchasing departments.
Through PO account assignment, Purchasing can also specify which G/L accounts are to be charged in the financial accounting system.

7. Purchasing - integration with other modules
Sales and Distribution (SD)
Within the framework of materials planning and control, a requirement that has arisen in the Sales area can be passed on to Purchasing.
When a requisition is created, it can be directly assigned to a sales order.

8. Process flow in purchasing
Determination of Requirements
Materials requirements are identified either in the user departments or via materials planning and control.
It includes both MRP proper and the demand-based approach to inventory control.
The regular checking of stock levels of materials defined by master records, use of the order-point method, and forecasting on the basis of past usage are important aspects of the demand management.
You can enter purchase requisitions yourself, or they can be generated automatically by the materials planning and control system.

9. Process flow in purchasing
Source Determination
The Purchasing component helps in identifying potential sources of supply based on past orders and existing longer-term purchase agreements.
This speeds the process of creating requests for quotation (RFQs)
Vendor Selection and Comparison of Quotations
The system is capable of simulating pricing scenarios, allowing you to compare a number of different quotations.
Rejection letters can be sent automatically.

10. Process flow in purchasing
Purchase Order Processing
The Purchasing system adopts information from the requisition and the quotation to help you create a purchase order.
You can generate Pos yourself or have the system generate them automatically.
Vendor scheduling agreements and contracts are also supported.
Purchase Order Follow-Up
The system checks the reminder periods you have specified
System automatically prints reminders or expediters at the predefined intervals.
It provides you with an up-to-date status of all purchase requisitions, quotations, and purchase orders.

11. Process flow in purchasing
Goods Receiving and Inventory Management
Goods Receiving personnel can confirm the receipt of goods simply by entering the Po number.
By specifying permissible tolerances, buyers can limit over- and underdeliveries of ordered goods.
Invoice Verification
The system supports the checking and matching of invoices.
Invoice verification can be based on purchase orders or GR documents or directly to a vendor without any document reference.

12. Std. Menu options in Purchasing
Create
Use this option to create a purchasing document .
Enter the required information and save the document .
The document is then stored under a unique number.
Change
Use this option to change a purchasing document .
You need the document number in order to access the document.

13. Std. Menu options in Purchasing
Display
Use this option to display a purchasing document .
You cannot change or add any information to the document that is displayed .
You need the document number in order to access the document.
List displays/reporting
You can use these options to generate reports analyzing purchasing documents
Example
List of all purchase orders for Vendor ABC

14. Std. Menu options in Purchasing
Follow-on functions
This option allows you to perform tasks related to (following on from) but not included in the purchasing functionality.
Example
Entering a goods receipt or an invoice in the system.
Messages
This option enables you to print or transmit documents in message form
Transmission via fax, Printouts etc

15. Purchasing Documents Definition Types of purchasing documents
A purchasing document is an instrument used by Purchasing to procure materials or services.
Types of purchasing documents
Request for quotation (RFQ)
Transmits a requirement defined in a requisition for a material or service to potential vendors .
Quotation
Contains a vendor's prices and conditions
It is the basis for vendor selection.

16. Purchasing Documents Contract Purchase order (PO)
The buying entity’s request or instruction to a vendor (external supplier) to supply certain materials or render/perform certain services/works,
It formalises a purchase transaction .
Contract
In the SAP Purchasing component, a type of "outline agreement", or longer-term buying arrangement .
The contract is a binding commitment to procure a certain material or service from a vendor over a certain period of time.

17. Purchasing documents Structure
Each purchasing document is subdivided into two main areas:
The header
The header contains information relevant to the whole document .
Example, information about the vendor and the document number is contained in the document header
The individual items .
The items specify the materials or services to be procured .
Example, The material description and the order quantity are specified in each item.

18. Purchasing documents Classification of Purchasing Documents
The additional data
It provides extra information about the item, and has no direct connection with the item procurement data.
Example,
account assignment data
PO history for an item, which contains information on already recorded goods and invoice receipts relating to the item.
Classification of Purchasing Documents
Purchasing documents are differentiated in the SAP system via the document type .
Example, relevant number range depends on document types

19. Purchasing documents Numbering of purchasing documents
Document types are defined for RFQs, purchase orders, and contracts
Numbering of purchasing documents
Each document is assigned a unique number .
This number can be assigned internally or externally , depending on the policy .
Internal number assignment means that the system assigns the number.
External number assignment means that the person creating the document must supply it.
Alphanumeric assignment is only possible in the latter case.

20. Purchase requisitions
Definition
A purchase requisition is a request or instruction to Purchasing to procure a certain quantity of a material so that it is available at a certain point in time.
It is an internal document.
Requisitions can be created in the following ways:
Directly: Someone from the requesting department enters a purchase requisition manually.
Indirectly: The purchase requisition is created via another SAP component.
Purchase requisitions can be subject to a release procedure.

21. Purchase requisitions - integration
Requisitions can be created indirectly in the following ways:
via materials planning and control
The component Consumption-Based Planning suggests materials that need to be ordered on the basis of past consumption or usage figures and existing stock levels.
The order quantity and the delivery date are determined automatically.
Materials planning and control can stipulate that a purchase requisition is to be resubmitted to the purchasing department if it has not been processed after a predefined period of time.

22. Purchase requisitions - integration
Requisitions are generated automatically from production orders if
They contain an external processing operation (e.g. subcontracting work)
A precondition is that the control key for the operation allows or prescribes external processing.
they contain non-stock components

23. Purchase requisitions
Procurement types
Standard
Subcontracting
Components to be provided can be entered.
Consignment
Stock transfer
External service
Service specifications can be entered

24. Manual creation of PR Things to remember Item category
Account assignment category
Purchasing organization
Purchasing group
Requirement tracking number
Delivery date
Item with or with out material master record
Order quantity

25. Creating Request For Quotation
Automatically from PR
Manually
With reference to PR
With out reference to PR
Delivery address
Address of the company asking for quotation, by default it is the address of E+L. But it can be changed.
vendor address
Just enter the codes of the vendor, System will take other details from vendor master.
Quotation dead line
Delivery date

26. RFQ (contd…) Printing RFQ Send the Printed RFQ to the vendors
Receive the quotation from the vendor
Maintain the RFQ
Enter the net price quoted by the vendor
Enter the pricing conditions
Terms of payment
Update the info record if reqd

27. Quotations Compare the quotations
Maintain the collective number in the RFQs
Quotations can be compared based on price
Discounts and delivery costs can be included
Comparison can be based on effective price also
System compares and gives the ranking list
Percentage basis for comparing quotations
Mean value equals 100%
Maximum value equals 100%
Minimum value equals 100%

28. Outline agreements with the vendor
To Setup longer-term purchasing arrangements with vendors regarding the supply of materials or the performance of services.
Outline agreements can be subject to a release (approval or clearance) procedure.
Agreement types
Quantity contract
Value contract

29. Outline agreements Structure
Document header: containing information relating to the entire agreement. For example, the vendor information and header conditions are in the document header
Items: containing the information specific to the relevant material or service.
statistics on ordering activities for the item
quantity or price of the item
conditions, such as quantity discounts and surcharges

30. Outline agreements Texts in Outline Agreements
Header texts
Item texts
You can create your own text types
Creating a outline agreement
Outline agreement can be created with reference to a RFQ or without any reference
Important terms
Purchasing organization
Purchase group

31. Outline agreements Target quantity Target Value Pricing conditions
Validity starting and ending date
Vendor address
Delivery address
Remainders