1. The Procurement Process

2. Introduction (1)
The procurement process involves purchasing goods from vendors through an internal purchasing organization
These goods might be used
for resale
in a manufacturing process
as packaging

3. Introduction (2) Processes Vendors must be managed
Supplier agreements
Purchase orders are issued (automated)
Goods are received into inventory
(warehouse)
Generates automated accounting transactions
Invoices are verified (automated) (accounting)
Payments are made (automated) (accounting)

4. Vendors Vendors (suppliers) sell goods to us
Some information is pertinent to the company
Some is accounting related
We should have secondary suppliers
We have pricing agreements

5. Vendors (Automated Assignment)
We have supplier agreements with vendors to automate procurement
Generate automatic purchase orders
It’s accomplished through agreements

8. Purchasing Purchasing can be centralized or decentralized
Centralized (one purchasing organization for many plants)
Decentralized (many purchasing organizations)
When to use one over another?

9. Organizational Structure (Plants 1)
In plants, we make things, store things, or do things
A plant has a purchasing organization assigned to it
In OFBiz we make and store things in a warehouse
There is a hierarchical relationship between the
Company
It’s plants
The storage locations within a plant

10. Materials Introduction
Materials are the things we buy from vendors
Supplies that we consume internally
Trading goods that we buy and resell
Raw materials that we use in production
Semi-finished goods (assemblies) that we make from raw materials and use in the production of finished goods
Finished goods that we make and sell using raw materials and semi-finished goods (assemblies)

11. Purchasing Information
We purchase materials from vendors
Purchasing information defines the relationship between a vendor and a material
This information is used to create purchases from
Quotations
Manually

12. Standard Purchasing Documents
Purchase requisition
Request for quotation
Purchase order
Goods receipt
Vendor invoice processing

13. Common Purchasing Sequence

14. Purchase Requisition An internal rather than external document
It instructs purchasing to request specific goods be purchased to arrive at a specific time
A requisition gets created
Manually
Automatically through MRP, production orders, or sales orders

15. Requisition Sourcing Requisitions must be assigned a source of supply
Internally
Get goods from our own plant or centralized warehouse
A list of sources
Vendors who provide the particular material
Outlined agreements
Long-term purchasing agreements
RFQ

16. Request for Quotation
Use for very expensive goods or goods with no known source
It’s an invitation for a vendor to bid
Quotations from vendors are legally binding offers
Price, materials, shipping details are all defined

17. Vendor Evaluation SAP allows you to evaluate vendors based on
Price
Quality
Delivery
You define scoring ranges
You define detailed criteria

18. Purchase Order
It’s really the acceptance contract for the vendor’s quotation
A request to procure specific materials or services and the conditions of procurement

19. Types of Purchase Orders
Standard
For services
For consignment
And others

20. An Order 

21. Purchase Order Structure
Remember the structure of a document
Header information
Vendor / payment terms
Item overview
Materials, quantities, item delivery dates
Line items
Item prices

22. Purchase Order (OrderHeader)

23. Purchase Order (OrderItem)

24. Purchase Order Output All is not printed
Purchase orders might be sent via
EDI
Fax
XML
These are just communication entities

25. ERP Order Automation

26. Goods Receipt
Here is where we receive the goods from the vendor from our purchase order
This is a warehouse function not a purchasing function!
Tasks
Determine whether order is correct
Update purchase order history with receipt of goods (automatic)
Updates physical inventory (automatic)
Updates G/L account (Inventory) (automatic)

27. Receipt of Goods (Events)
Several events fire when goods are received
Material document created
Accounting documents created
Inventory is updated
Purchase order status is updated

28. Vendor Invoice Processing
Invoices are validated against the corresponding purchase order
Discrepancies might cause the invoice to be blocked
When processed
The accounts payable liability is created
Payment process is initiated for financial accounting
Much of the invoice processing can be automated

29. Financial Accounting Processing
Accounting pays the invoice
Payment method
Bank
Items
It’s possible to pay all or part of an invoice
Medium
Can be done manually or automatically

30. ERP Automated Processing

31. Material Movement (2) Goods can be placed into different destinations
Into the warehouse
Unrestricted use
Blocked use
Quality assurance
More later when we talk about materials management