1. The Procurement Process
Chapter 4
The Procurement Process
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2. Learning Objectives
Describe the major organizational levels associated with the procurement process.
Discuss the four basic categories of master data that are utilized during the procurement process.
Explain the key concepts associated with the procurement process
Identify the key steps in the procurement process and the data, documents, and information.
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3. Learning Objectives (Continued)
Effectively use SAP ERP to execute the key steps in the procurement process
Utilize SAP ERP to extract meaningful information about the procurement process
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4. A Basic Procurement Process
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5. Outline Organizational data Master data Key concepts Process Reporting
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6. Organizational Data Client Company code (CC) Plant
Storage location (S Loc)
Purchasing organization (P Org)
Purchasing group
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7. Plant Many definitions or uses. A location
That holds valuated stock (for distribution)
Where production planning is carried out
Where products and services are created
That contains service or maintenance facilities
Factory, warehouse, distribution center
Can be assigned to one CC only
A CC can have many plants
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8. Storage Location A place, within a plant, where materials are stored
Areas designated for different types of material (raw material, work-in-process, finished goods)
More sophisticated divisions including storage bins, cabinets, trays
A plant must have at least one storage location
A storage location can belong to only one plant
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9. GBI Storage Locations
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10. Purchasing Organization
Identify and select vendors
Negotiate general conditions of purchase and contracts for one or more plants or companies.
Determine pricing conditions
Typically three models for Purchasing Organization
Enterprise-Level
Company-Level
Plant-Level
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11. Enterprise-Level Purchasing Organization
Also known as cross-company code model
One Purchasing Organization assigned to all CC in a client
Purchasing for all plants across all CC
Highly centralized – corporate Purchasing Org
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12. Enterprise-Level Purchasing Organization
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13. Company-Level Purchasing Organization
Also known as cross-plant model
Different Purchasing Organizations are assigned to each CC
Purchasing for all plants in one or more CC
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14. Company-Level Purchasing Organization
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15. Plant-Level Purchasing Organization
Also known as plant-specific model
Each plant has its own Purchasing Organization
Highly decentralized
Changed this “Purchasing for one or more plant” to each plant has its own PO
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16. Plant-Level Purchasing Organization
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17. Reference Purchasing Organization
One centralized Purchase Org for high-level decisions across the enterprise
Multiple CC-specific and plant-specific Purchase Org
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18. Purchasing Group
A buyer or group of buyers responsible for certain materials or groups of materials
Can be internal to the company or external
Decide to purchase land, but use a realtor (external purchasing group) to execute the purchase
Not assigned to or related to purchasing org
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19. Master Data Material Master Vendor Master Purchasing info record
Conditions
The order of this material types do not match the book.
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20. Material Master
Data needed to execute transactions related to materials (along with org data)
Data are grouped by different user areas (views)
Data are specific to (defined for) for different organizational levels
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21. Material Master – Views
Basic data
Purchasing
Accounting
Forecasting
Sales
Plant / Storage
Work Scheduling
MRP
Classification
Warehouse Management
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22. Material Master – Views
Basic data
Description, unit of measure, weight, material group
Purchasing
Purchasing group, GR processing time, delivery (under / over) tolerances
Accounting
Currency, valuation class (link to G/L), price control (moving price, standard price, future price)
Plant / Storage
Storage requirements (hazard, temperature, etc.)
Shelf life
Weight, volume
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23. Material Master - Views
Views for other processes
Forecasting (Material Planning process)
Sales (Fulfillment process)
Work Scheduling (Production process)
MRP (Production process)
Classification (PLM process)
Warehouse Management (WM process)
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24. Material Master - Views
Different material types have different required views
Examples:
Raw material: no sales view
Finished Goods: no purchasing view
Trading goods: no production related views
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25. Material Master – Org Levels
Defines the level at which the master data is maintained
Can have different data for different combinations of Org data
Purchasing: Plant, storage location
Sales: Sales Area (Sales Org, Distribution Channel)
Warehouse: Warehouse #, storage type
Example:
SHRT MI00+ TG00
SHRT SD00+ TG00
SHRT US00 + Wholesale channel
SHRT US00 + Internet channel
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26. Demo 4-1: Review Material Master
Review some of the data included in a material master.
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27. Vendor Master Data needed to do business with vendors
Data needed to execute transactions related to vendors (along with org data)
Data are specific to (defined for) different organizational levels. The three segments are:
Client level data (General)
Company code level data (Accounting)
Purchasing organization level data (Purchasing)
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28. Vendor Master Segments
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29. Data in the Vendor Master
May want to include Table 5-1: List of vendors for GBI
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30. Vendor – General Data Client-level data
Valid across all CC in a client
Examples
Name,
Address
Communication (phone, fax)
Search term
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31. Vendor – Accounting Data
Company code specific data
Valid for the entire company code across purchasing areas
Examples
Account information
Bank information
Reconciliation account
Payment terms and methods
Communication (dunning)
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32. Vendor – Purchasing Data
Separate for each Purchasing Organization
Applies to the specified Purchase Org
Examples
Partner functions (vendor, invoicing party, payment recipient)
InCoTerms: defines responsibilities and costs of shipment
Freight, insurance, customs clearance, locations
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33. Demo 4-2: Review Vendor Master
Review some of the data included in a vendor master.
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34. Purchasing Info Record
Relates vendors and materials.
One info record per combination of vendor and material (or material group)
General data
Conditions: pricing, discounts, free goods (current and future)
Vendor data
Texts (notes)
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35. Purchasing Info Record
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36. Purchasing Info Record
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37. Conditions Pricing Conditions Obtained from Gross price
Discounts and surcharges
Freight / shipping
Obtained from
Purchasing info records
Contracts and agreements
Other sources
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38. Demo 4-3: Review Purchasing Info Records
Review data in a purchasing info record.
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39. Key Concepts Item categories Account determination Stock type/status
Goods movement
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40. Item Categories Defines the process used to procure the item
Standard
Subcontracting
Components provided; finished product received
Consignment
Liability only when withdrawn from stock
Service
Stock transfer
Third party order
Ship to third party; bill to us (drop shipment)
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41. Demo 4-4: Review Item Categories
Review various item categories used in the purchasing process.
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42. Account Determination
Which GL account to assign to PO?
Defined in material master (valuation class)
Account assignment categories
Used when purchasing material without material master
Assets, Production Order, Cost Center, Sales, Order, Project
Automatic GL account determination based on category
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43. Purchase for Stock vs. Consumption
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44. Stock Types / Status Based on usability of material Unrestricted use
In quality inspection
Blocked stock (damaged, unusable; wrong delivery)
Stock in transit
Deleted “Stock in transit” as a type. Its not stated in the book
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45. Goods Movement
A transaction that causes a change in stock (value or status)
Categories of Goods Movement
Specific Movement types
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46. Structure of a Material Document
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47. Demo 4-5: Review a Material Document
Review data included in a material document.
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48. Goods Movements Goods Receipt Goods Issue Stock Transfer
From vendor or production process
Increase in quantity and value of stock
Goods Issue
To sales order or internal consumption
Decrease in warehouse stock
Stock Transfer
Physical movement of material between storage locations
Sloc to Sloc
Plant to Plant
CC to CC
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49. Goods Movements Transfer Posting
Results in a change in material status
In-quality inspection/ blocked/ unrestricted use
One material type to another
May or may not include a change in location (Sloc, plant)
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50. Demo 4-6: Review Goods Movements and Movement Types
Review various goods movements and movement types
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51. A Detailed Procurement Process
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52. Process Steps Trigger Data Task details Outcomes
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53. GBI Story
Inventory of t-shirts (SHRT1000) is low (<=50) in the Miami plant
Therefore it is necessary to procure more t-shirts
Spy Gear is the only supplier of t-shirts
Quantity purchased is 500
Purchase price is $15 per t-shirt
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54. Elements of the Purchase Requisition Step
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55. Purchase Requisition Trigger Data Task details: none Output
Other processes
Manually
Data
User input: Dates, materials, quantities
Master data: Material master, Vendor, Info record
Organizational data: Client, CC, P Group
Task details: none
Output
Document: Purchase requisition
Subsequent steps
Purchase Order
RFQ
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56. Data in a Purchase Requisition
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57. Converting a Purchase Requisition to a Purchase Order
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58. GBI Scenario Material planning process has determined
Re-order point = 50
Order quantity = 500
Miami plant employee reviews inventory report and determines that it is necessary to reorder
Requisition:
500 SHRT1000 to be delivered at the Miami plant by a specified date
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59. Demo 4-7: Create a Purchase Requisition
Create a purchase requisition for stock material.
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60. Elements of the Purchase Order Step
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