1.  XX Consulting 2000 MM02 - Purchasing Processing November, 2000

2.  XX Consulting 2000 Topic One: Introduction to Purchasing Topic Two: Purchase Requisitions Topic Three: RFQ/Quotation Topic Four: Purchase Orders Schedule

3.  XX Consulting 2000 Overview in MM Materials Planning Invoice Verification Internal and external accounting Sales and distribution Master Data material batches G/L accounts customer warehouses.. Goods issue Transfer posting Goods issue Invoice ? Inventory Management Internal Procurement Production External Procurement Purchasing vendor

4.  XX Consulting 2000 Procurement Environment MM Materials management Order Order processing 4 2 Source determination Vendor selection 3 InvoiceOrder ? Invoice verification 7 Order follow-up 5 Requirement determination 1 MRP Payment 8

5.  XX Consulting 2000 The Procurement Process Goods Receipt Purchase Order Invoice Processing Vendor invoice Requisition for Goods or Services Purchase Requisition 10 20 30 Purchase Order 10 20 30 Planning, Reporting, and Analysis

6.  XX Consulting 2000 External procurement environment Source list Piece % Conditions USD Piece % Conditions USD Info record RFQs Quotations Invoice receipt Purchase requisition Source determination Vendor selection Requirements determination Outline agreement Goods receipt Purchase order Purchase order history

7.  XX Consulting 2000 Purchasing documents RFQ Purchase order Purch.order Purchase requisition Purchase requisition Contract Release Order RFQ ? Quotation A B ? Scheduling Agreement Release Order

8.  XX Consulting 2000 Structure of a purchasing document Purchasing document Header Items 1 2 3... 3 2 Item 1 -Gen. description of planned procurement Sub-item 1 -Service description -Quantities -Conditions 1 Document header -General data -Statistics -Messages -Conditions

9.  XX Consulting 2000 Purchasing DU Document Item Category/Account Assignment Category The item category and the account assignment category determine how an item is processed. The item category and the account assignment category determine how an item is processed. D =SubcontractU =Unknown K =Cost center Project... Item categoryAcct. assgt. cat. P =

10.  XX Consulting 2000 Procurement for stock Material Purchasing document(s) Item: no account assignment category Vendor Goods receipt Goods issue Warehouse Production

11.  XX Consulting 2000 Consumption Procurement for consumption Material Purchasing document(s) Item: with account assignment category Vendor Goods receipt

12.  XX Consulting 2000 Procedure for creating purchasing documents11 22 33 F11 Save F11 Save Fill in initial screen Fill in item data in the overview screen Maintain detail and additional data if necessary

13.  XX Consulting 2000 Data entry help11 22 Initial screen Item overview Default values Items Reference to other purchasing documents Reference to other purchasing documents Document Create purchasing documents

14.  XX Consulting 2000 Purchase requisition Source Automatic Creation Manual Creation by User Department Department 1Department 2 Purchase Requisition 10 20 30  Planning MRP MPS  Plant Maintenance  Production orders  Sales orders OR

15.  XX Consulting 2000 Purchase Requisition Processing RFQ ? Release order Release order o.k. MRPDirect entry Purchase requisition Determine source of supply Vendor Release Allocate and process Purchase order

16.  XX Consulting 2000 Request for Quotation/ Quotation Quotation ! RFQ ? Requisition New material Source ? Vendor A Vendor B One-time vendor Quotation price comparison list Purchase Order Rejection

17.  XX Consulting 2000 Purchase Order Vendor Purchase Requisition RFQ Purchase Order Master Data

18.  XX Consulting 2000 Goods Receipt Vendor Material Document Purchase Order Accounting Documents GR Area

19.  XX Consulting 2000 Central master data in purchasing Vendor Material Source list Piece. % conditions USD Piece. % conditions USD Info record Source list

20.  XX Consulting 2000 Purchasing info records Vendor A Material Piece % Conditions USD Piece % Conditions USD Info record Vendor B Stock material M1 Consumable material M2 Service S1 Info record

21.  XX Consulting 2000 Conditions Gross price Discount % Net price: Fixed freight charge + Effective price: PB00 RA01 FRA1 Condition type Calculation type Scale basis Price/quantity scale Pricing procedure

22.  XX Consulting 2000 Source list 1.1.96 - 30.6.96 Vendor 1 allowed Vendor 2 allowed Vendor 3 allowed Source list Material M1 Plant 0001 1.7.96 - 31.12.99 Vendor 1 fixed

23.  XX Consulting 2000 Types of external procurement (1) Purchase requisition Purchase requisition RFQ Reference document Reference document Purchase order Piece % Conditions USD Piece % Conditions USD Info record Vendor

24.  XX Consulting 2000 Types of external procurement (2) Reference RFQ Reference RFQ Reference contract Reference contract Contract Purchase requisition Purchase requisition Vendor Release order 1122

25.  XX Consulting 2000 Purchase requisitions can be created with respect to requirements that are to be covered by procurement from external sources Among other things, SAP offers support in RFQ/quotation processing, source determination/vendor selection and the monitoring of purchase orders You can purchase for stock or for consumption Procurement for consumption takes place with account assignment. The type of account assignment is controlled by the account assignment category The goods receipt processes take place with reference to the purchase order Introduction to Purchasing Summary

26.  XX Consulting 2000 Exercise for Introduction to Purchasing Now it’s time for you to do exercise: No Exercise!

27.  XX Consulting 2000 Topic One: Introduction to Purchasing Topic Two: Purchase Requisitions Topic Three: RFQ/Quotation Topic Four: Purchase Orders Schedule

28.  XX Consulting 2000 Purchase Requisitions Purchase requisitions are internal documents requesting a certain quantity of material or service on a certain date. (Internal documents are not used outside of the company.) Purchase requisitions can be created: Manually Automatically:  Planning functions (MRP, MPS)  Production orders  Sales orders Release approval procedures can be established.

29.  XX Consulting 2000 Processing Purchase Requisitions Purchase Requisition 10 20 30 Requisition o.k. Create purchase requisition Contract RFQ Purchase Order VendorManual or Automatic Determine source of supply Release (optional) Allocate vendor and process

30.  XX Consulting 2000 Data flow Text _________ _________ _________ _________ Material Purch. info record Source list Outline agreement VendorText Purchase order Outline agreem. Requirement Material

31.  XX Consulting 2000 Account Assignment Consumable Material with material master record Enter account category Automatic account assignment Data from material master record Manual account assignment User must enter data Stock account Consumption account Cost Center Asset Stock material Without material master record With material master record Account assignment With account category

32.  XX Consulting 2000 Consumables and Account Assignment Consumables are charged to different types of objects through account assignment. Examples of Account Assignment Codes: K = Cost Center A = Asset P = Project C = Sales Order

33.  XX Consulting 2000 Account Assignment Categories Asset Sales order Individual customer requirement Production order Cost centerProject A A C C D D E E F F K K O O Unknown account assignment

34.  XX Consulting 2000 Purchase requisition Source Automatic Creation Manual Creation by User Department Department 1Department 2 Purchase Requisition 10 20 30  Planning MRP MPS  Plant Maintenance  Production orders  Sales orders OR

35.  XX Consulting 2000 Release Procedure: Example 1 2 Requisitions released for issue of RFQ Requisition released for issue PO 3 4 5

36.  XX Consulting 2000 Release Procedure ( Approval ) PO Item10 20 30 PO Approval o.k. PO RFQ Item10 20 30 Requisn. Item10 20 30 Approval o.k. o.k. Purchase requisitions Other purchasing documents

37.  XX Consulting 2000 Releasing Requisitions Convert requisition into RFQ Convert requisition into PO PReq. Item 10 Strategy S1 blocked Starting situation Release point 1 o.k. Release point 2 o.k. Release point 3 o.k. Release point 4 o.k. PReq. Item 10 Release point o.k. Individual release Release point o.k. PReq. Item 10 Collective release Effect releases (signify approval) ++ +

38.  XX Consulting 2000 Processing Released Purchase Requisitions PO Purchase requisition Purchase requisition Determine source of supply Convert Purchase Requisition RFQ ? Piece. % conditions USD Piece. % conditions USD Info record

39.  XX Consulting 2000 Purchase Requisition Summary Purchase requisitions are internal documents requesting purchasing to procure required materials or services from external sources of supply Purchase requisitions can be created manually by the requesting department or automatically via MRP or creation of sales order Purchase requisitions contain important procurement data. This data can be adopted into the purchase order The item category and the account assignment category have an important controlling function Various levels of authority can give the go ahead for a planned procurement in the SAP system by means of a release (approval ) procedure

40.  XX Consulting 2000 Exercise for Purchase Requisitions Now it’s time for you to do: MM02 - Exercise 3 45 minutes

41.  XX Consulting 2000 Topic One: Introduction to Purchasing Topic Two: Purchase Requisitions Topic Three: RFQ/Quotation Topic Four: Purchase Orders Schedule

42.  XX Consulting 2000 Processing RFQs Quotation ! RFQ ? Requisition New material Source ? Vendor A Vendor B One-time vendor Quotation price comparison list Purchase Order Rejection

43.  XX Consulting 2000 Structure of the RFQ Header Vendor Messages Header Quotation texts deadline Items RFQ Statistics Texts Schedule line 2.110 hrs. 10 pcs. 2.211 hrs. 50 pcs. Changes

44.  XX Consulting 2000 Data flow Purchase order Request for quotation ? Text _________ _________ _________ _________ MaterialVendor Purchasing information Material Quotation ! Text Requisition

45.  XX Consulting 2000 Collective Number for RFQs RFQ 1 Vendor A Material 1 Material 2 Material 3 RFQ 2 Vendor B Material 1 Material 2 Material 3 RFQ 3 Vendor C Material 1 Material 2 Material 3 Issue of multiple RFQs for a certain planned procurement under a common number ???

46.  XX Consulting 2000 Quotation Processing11 Vendor B Quotation for RFQ 2 Item 10 Gross price:400/t Surcharge:50% Vendor C, B - Rejection- Thank you for your offer. Unfortunately, we cannot place an order at this time..... Vendor A Quotation for RFQ 1 Item 10 Gross price:400/t Discount: $50 Vendor C Quotation for RFQ 3 Item 10 Gross price:400/t Fixed costs: $40 Vendor A - Order - Mat. Qty Price Steel 2t 350/t 33 Steel 2 t Price 350/t480/t520/t450/t Quotation 1Quotation 2Quotation 3 Mean value quotation Enter price and pricing conditions Compare quotations using price comparison list Create info record or reject quotation 22 450/ t Market price

47.  XX Consulting 2000 Quotation Comparison List QuotationVendor A S 1$ 150.00 S 2 S 3$ 200.00 Purch. order Vendor C S 1$ 100.00 S 2$ 300.00 S 3$ 200.00 Vendor C Vendor AAverage S1100150125 S2300 S3200 Total600650625 Price comparison list Quotations Comparison Per outline level Per service line 300

48.  XX Consulting 2000 Pricing Conditions Prices Surcharges and discounts Pricing conditions % or absolute amount on gross/net price Freight % or absolute amount Cash discount, etc.

49.  XX Consulting 2000 Condition Types CodeDescription PBXX RA01 SKTO Price Discount % Cash discount Control Calculationpercentage rule Reference gross price amount Calculationpercentage rule Reference net value amount

50.  XX Consulting 2000 RFQ Summary When creating RFQs, the items are entered first and then assigned to various vendors. This creates several similar RFQs, which are addressed to different vendors. To access RFQs that have the same contents more easily, a collective number should be set in the RFQ header. Similar RFQs are grouped together A quotation contains the bidder’s prices and conditions for the items in the RFQ. The quotation is entered as an update to the RFQ. The and the quotation are one document. You can compare quotation data using a quotation price comparison list

51.  XX Consulting 2000 Exercise for RFQ & Quotation Now it’s time for you to do: MM02 - Exercise 4 60 minutes

52.  XX Consulting 2000 Topic One: Introduction to Purchasing Topic Two: Purchase Requisitions Topic Three: RFQ/Quotation Topic Four: contract Topic Five : Purchase Orders Schedule

53.  XX Consulting 2000 Outline Agreements Schedule line Quantity Delivery date/ time Scheduling agreement Validity period Material Total quantity Conditions Quantity contract Value contract Central contract Distributed contract Contract Validity period Material Total quantity/ Conditions Contract release order Quantity Delivery date

54.  XX Consulting 2000 General Concept A contract is a long-term agreement with a vendor to provide a material or service for a certain period of time. Contracts may be created: Manually With reference (e.g., purchase requisition, RFQ/quotations, other contracts) Two types of contracts: Quantity:Contract is fulfilled when release orders totaling an established quantity have been issued (e.g., contract for 50,000 meters of electrical wire). Value:Contract is fulfilled when release orders totaling a given value have been issued (e.g., contract for $100,000 worth of electrical wire).

55.  XX Consulting 2000 Processing Contract Vendor One-time vendor Statistics Contract requisition Contract Standard item Consignment item Material unknown Material group Service item Single/multiple acct. assgt. Cost center Project Order Unknown With material W/o material RFQ Reference contract opt. mand. Purchase requisition release order Item/item category Asset

56.  XX Consulting 2000 Contract Types Quantity Contract ( Type ‘MK’) Value Contract (Type ‘WK’) Target value of $100,000 for electrical wire Target quantity of 50,000 meters of electrical wire at $2/meter Contract

57.  XX Consulting 2000 Structure of a Contact Header VendorConditions TextsMessages Items Outline agreement Statistics General statistics Release order documentation Changes $ Conditions Account assignment Additional data Texts

58.  XX Consulting 2000 Creating Contract Header Create Contract: Header Data Valid period of the contract. Payment terms for each release order. If avaluecontract were specified, the total contract value would be required. Agreement type MK specifies a quantity contract.

59.  XX Consulting 2000 Creating Contract Item Create Contract: Item Overview Material group For stock material, item category and account assignment are left blank. Negotiated price of contract material.

60.  XX Consulting 2000 Item Category and Account Assignment Items / item category Stock material Assets Contract Automatic Account Assignment - Cost center - Project - Sales order - Asset - Consumption Account - Single or Multiple Account Mandatory Standard item Consignment item Material unknown Material group

61.  XX Consulting 2000 Item Category and Account Assignment Item Category and Account Assignment Category codes determine how each line item of the contract will be processed. Contract Release Order M U K Item Category Code M =Unknown material Account Assignment Category Code U =Unknown account will be charged Item Category Code =M changed to blank designate a standard item. Account Assignment Category Code K = U change to K to designate Cost Center.

62.  XX Consulting 2000 Account Category "U"- Unknown Account Assignment Examples of Account Assignment Categories: K - Cost Center A - Asset C - Sales Order P - Project Contract Release Order U K If the Account Assignment Category is unknown when the contract is created, “U” must be entered at the line item level. To create a release order, all account assignment categories must be defined and a specific object identified. For example, the “U” is replaced with a ”K” to denote assignment to a cost center. Now, the R/3 System requires that a specific cost center be identified.

63.  XX Consulting 2000 Contract Conditions PB00Gross price ZB00Absolute surcharge10.00 Validity period 1 01/01/96 - 12/31/97 Validity period 2 06/01/96 - 06/30/96 RA00 Discount from net price 5% Scale1 pcs 200.00100 pcs 195.00500 pcs 189.00

64.  XX Consulting 2000 Manual Release Order Contract Purchase order Purchase order PO date PO quantity Open target quantity Release order documentation release order Issued against a contract

65.  XX Consulting 2000 Manual Release Order Created release order via Purchase ordercreate with reference function Contract Release 10 20 30 Reference to the contract must be entered manually. Delivery date, order quantity and contract number must be known. Release order is created and sent to the vendor. Release order documentation updated in contract. Order

66.  XX Consulting 2000 Release Order Documentation Contract The release order documentation provides you with information on the current status of the release orders issued against a contract It indicates the total value of each release order and the remaining open target value of the contract Rel. order Release order documentation Rel. order PO number) DateValue Open target value15,000 450000026 450000042 450000056 05/01/1996 12/02/1996 06/04/1996 1,000 1,500 2,500

67.  XX Consulting 2000 Contract Summary An outline agreement can be a contract or a scheduling agreement Contracts are subdivided into quantity and value contracts A contract item can be valid for a single plant or for all plants covered by a purchasing organization. It can related to an individual material or all the materials belonging to a material group

68.  XX Consulting 2000 Exercise for Contract Now it’s time for you to do: MM02 - Exercise 5 40 minutes

69.  XX Consulting 2000 Topic One: Introduction to Purchasing Topic Two: Purchase Requisitions Topic Three: RFQ/Quotation Topic Four: contract Topic Five : Purchase Orders Schedule

70.  XX Consulting 2000 General Concept Purchase orders are: A formal request to provide materials or services. An important internal planning and tracking tool. Created manually, automatically by MRP, or by referencing another purchasing document. Purchase orders identify: Vendor Material and/or service Quantity ordered Price Delivery date and conditions Terms of payment Purchase Order 10 20 30

71.  XX Consulting 2000 Processing Purchase Orders Purchase requisition RFQ ? ? Reference document Contract Pcs % Conditions $ Pcs % Conditions $ Info record Order history Purchase order Vendor

72.  XX Consulting 2000 Convert PR to PO11 22 Purchase requisition PO Purchase requisition Source: Vendor AC PO Purchase requisition With reference to template Assign Source Process assignment

73.  XX Consulting 2000 Structure of a Purchase Order Header Vendor Conditions Texts Messages Items Purchase order Statistics Overview Order history Changes $ Pricing conditions Delivery schedule Account assignment Additional data Texts

74.  XX Consulting 2000 Structure of a Purchase Order Item detail information contains information specific to the material or service (quantity, price, delivery date, description, item category, etc.). Display Purchase Order: Item Overview Header information includes information specific to the entire purchase order (currency, vendor, terms of payment, etc.).

75.  XX Consulting 2000 Item Category Item category defines whether a purchase order item requires: Material number Account assignment Goods receipt and/or invoice receipt

76.  XX Consulting 2000 Account Assignment Consumable Material with material master record Enter account category Automatic account assignment Data from material master record Manual account assignment User must enter data Stock account Consumption account Cost Center Asset Stock material Without material master record With material master record Account assignment With account category

77.  XX Consulting 2000 Item Category in Purchase Order Automatic Account Assignment - Cost center - Project - Sales order - Asset Stock material Consumable material Standard item Consignment item Text Third-party Sub Contracting Items / item category Mandatory Consumption Account - Single or Multiple Account Consumption Account - Single or Multiple Account

78.  XX Consulting 2000 Multiple Account Assignment Purchase order 10.Swivel chairs 12 pcs. 20. 30. 40. Account assgt.Qty.Cost center item 121 262 343

79.  XX Consulting 2000 Special Forms of Procurement Purchase orders Subcontracting deals Manufacturing work done by vendor Plant A A A Consignment stores Customer Vendor A A A KMT Stock transfer Consignment Third-party

80.  XX Consulting 2000 Purchase Order Summary When creating purchasing documents, you can reference various documents. For example, you can create purchase orders with reference to quotations or purchase requisitions Data stored in the header of the purchasing document is valid for the whole document ( Vendor, conditions, currency, texts, etc ) Data that is entered for an item in a purchasing document is only valid for that item ( conditions, texts, additional data, etc ) When goods movements are posted ( e.g. goods receipt ) the system creates a material document to record the quantity

81.  XX Consulting 2000 Exercise for Purchase Orders Now it’s time for you to do: MM02 - Exercise 6 60 minutes

82.  XX Consulting 2000 Congratulations !