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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61. Purchase Order Creation Data Manually or automatically
With or without reference to other documents
Data
Documents: Purchase requisition, Purchase order, RFQ, Quotation
Master data:
Material (characteristics)
Vendor (terms)
Info record (pricing)
Conditions (pricing)
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62. Data in a Purchase Order
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63. Purchase Order Tasks Outcomes
Data automatically included from input sources
Source determination using info records, agreements and contracts, and source lists
Outcomes
Purchase order
Purchase requisition history – PO added
Communicate
with vendor (external procurement) using messages: fax, EDI, print
Plant (internal procurement) using transfer orders
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64. Purchase Order Structure
Header
Document number, dates
Vendor, currency, terms
PO total
Line items
Material number, description
Quantity, price, item total
Delivery date
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65. The Structure of a Purchase Order
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66. Purchase Requisition to Purchase Order
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67. Communicating with vendors
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68. Purchase Order Processing Options
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69. GBI Scenario Create purchase order Material: SHRT1000 Quantity: 500
Vendor: Spy Gear (from source list or manual entry)
Receiving plant: Miami
Reference document: purchase requisition
Price: $15 each (from info record)
Total PO value: $7500
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70. Demo 4-8: Convert Purchase Requisition to Purchase Order
Convert a previously created purchase requisition into a purchase order
Review data in the purchase requisition
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71. Elements of the Goods Receipt Step
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72. Goods Receipt Data Task Outcomes
Documents: PO, Delivery document (packing list)
Master data
Task
Verify materials receipt
Create GR document
Outcomes
Material documents
Header: Document number, date, reference
Details (items): Material, quantity, location, movement type
Financial Accounting documents
Header: Document number, date, reference, currency
Details (Items): GL accounts, description, amount
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73. Goods Receipt Outcomes Notifications Material master: stock and value
GL accounts (Stock/Consumption, GR/IR)
PO history – Material document added
Quality management
Quality inspection lot
Warehouse management
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74. Data In The Goods Receipt Step
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75. Financial Impact of Goods Receipt
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76. Material and Accounting Documents from a Goods Receipt
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77. Demo 4-9: Receive goods against a Purchase Order
Record the receipt of materials for the purchase order previously created.
Review data in the associated purchase requisition.
Review data in the associated purchase order.
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78. Elements of the Invoice Verification Step
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79. Invoice Verification Data Tasks Outcomes Vendor invoice Purchase order
Material document
Tasks
Three-way match
Outcomes
Financial Accounting documents
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80. Data needed for Invoice Verification
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81. Invoice Verification Outcomes GL: vendor account, A/P, GR/IR
PO history - invoice document added
Material master :
Stock value,
Moving average price (if using moving price vs. standard price)
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82. Financial Impact of Invoice Verification
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83. Demo 4-10: Receive and Verify an Invoice
Verify and record an invoice received from a vendor.
Review data in the associated purchase order
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84. Elements of the Payment Step
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85. Payment Processing Creation: manually or via automatic payment program
Data
Three-way match (or other process)
Payment method, account, items to pay,
Tasks
Calculate payment amount (discounts)
Post payment document (accounting document)
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86. Payment Processing Outcomes Financial Accounting Documents
Payments (checks, EFT, notifications)
Updates
GL accounts
Material master :Moving average price (if using moving price vs. standard price)
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87. Data needed for Vendor Payment
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88. Financial Impact of Vendor Payment
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89. Demo 4-11 Make payment to Vendor
Record payment made to a vendor for previously recorded invoices.
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90. Integration With Other Processes
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91. Reporting Source of data Instance level reporting (status)
Process level reporting
Lists and reports
Purchasing Information System
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92. Reporting - Sources Organizational data Master data
Transaction data (documents)
Purchasing documents
Material documents
Accounting documents
Invoice documents
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93. Reporting - Instance Status of a Requisition, Purchase Order
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94. List of Invoices
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95. Work List – List of Requisitions
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96. Demo 4-12: Display a List Report
Retrieve and display a list of invoices (online list)
Retrieve and display a list of open purchase requisitions (work list)
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97. Reporting - Standard Process level reporting
Standard reports / List displays
Logistics Information System
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98. Reporting – Logistics Information System
Components
Purchasing Information System
Sales Information System
Quality Management Information System
Inventory Control
Transportation Information System
Shop Floor Information System
Plant Maintenance Information System
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99. Reporting – Logistics Information System
Information Structures
Special tables of statistics from various modules that is constantly updated
Selection criteria (types of information)
Key figures: variables of interest
Quantitative values on measurable facts
Numbers (of orders, deliveries)
Quantities (of material)
Cost, delivery time
Characteristics: used to organize key figures
Vendors, material, organizational levels
Timeframe: day, week, month, etc.
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100. Standard Analysis
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101. Demo 4-13: Display a report using the Purchasing Information System
Generate a standard report using the purchasing information system for the US00 Purchasing Organization.
Drill down to several levels of information in the report.
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102. Flexible Analysis
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103. The Following Slides
The following slides will be hidden and are for Instructors that may want to use the SAP R/3 to demo functionality covered in the chapter.
Magal and Word | Integrated Business Processes with ERP Systems | © 2011

104. Review Material Master
Logistics -> Materials Management -> Material Master -> Material -> Display -> Display Current
Select
Material: T-Shirt (SHRT 1000)
Org levels: Basic data, purchasing, accounting1
Plant: MI00
Review data for several views
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105. Review Vendor Master
Logistics -> Materials Management -> Purchasing -> Master Data -> Vendor -> Central -> Display
Select Olympic Protective Gear.
Select company code US00
Select Purchasing Organization US00
Note the three areas of data
General data, CC data, Purchasing Organization data
Select all check boxes except withholding tax
Enter and review data in the various screens
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106. Review Purchasing Info Records and Conditions
Logistics -> Materials management -> Purchasing -> Master data -> Info Record -> Display
Select a GBI vendor – Olympic Protective Gear
Select a material – SHRT 1000
Select org levels
Note the four areas of data
General data, P Org data, Conditions, and Texts
Review data in the various screens
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107. Review Item Categories
Logistics -> Materials Management -> Purchasing -> Purchase Order -> Create -> Vendor/Supplying plant known
Close “header” and “item detail” sections
Open “item overview” section
Review choices for Account Assignment Category column (2nd column)
Review choices for Item Category (3rd column)
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108. Review Goods Movements and Movement Types
Logistics -> Materials Management -> Inventory Management -> Material Document -> Display
Search for material document. In search screen include only plant DL00
Review resulting list
Select one document (enter year if needed after selection)
Review document
Header items
Line items
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109. Create a Purchase Requisition
Need to purchase
500 t-shirts
Navigation:
Logistics -> materials management -> purchase requisition -> Create
Input: material number and quantity
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110. Create a Purchase Requisition
Automatic data entry
description, unit of measure, delivery date, material group
Review tabs, in particular:
Valuation: valuation price
Source of supply: none
Status: Proc. Status = not created; review options
Save
Document (requisition number):
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111. Create a Purchase Order
Navigation:
Logistics -> Materials Management -> Purchasing -> Purchase Order -> Create -> Vendor/supplying plant known
Automatic data entry (copy from requisition)
Document overview on
Selection variant – my requisitions
Select requisition and adopt
Note data transferred from requisition to order
Close item detail
Input
Select vendor
Enter price? (why or why not?)
Magal and Word | Integrated Business Processes with ERP Systems | © 2011

112. Create a Purchase Order
Navigation:
Logistics -> Materials Management -> Purchasing -> Purchase Order -> Create -> Vendor/supplying plant known
Automatic data entry (copy from requisition)
Document overview on
Selection variant – my requisitions
Select requisition and adopt
Note data transferred from requisition to order
Close item detail
Input
Select vendor
Enter price (why?)
Magal and Word | Integrated Business Processes with ERP Systems | © 2011

113. Example / Demo Open item detail and review tabs
Material data (source?)
Conditions
NOTE: no tab for PO status
What do these data apply to?
Open item header and review tabs
Org data
Status
Save
Document (PO) number:
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114. Example / Demo Review Purchase Requisition Navigation:
Logistics -> materials management -> purchase requisition -> Display
Review status tab
Note purchase order data
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115. Receive goods against a Purchase Order
Navigation:
Logistics -> Materials Management -> Inventory Management -> Goods Movement -> Goods Receipt -> For Purchase Order -> GR for Purchase order
Input
Close detail area tab
Enter (search for) PO number
Check “ok” box
Enter storage location: finished goods + Enter
Automatic data entry (tabs in detail data area)
Where: Movement type, stock type, plant
Save
Document (material document) number:
Magal and Word | Integrated Business Processes with ERP Systems | © 2011

116. Example / Demo Review Purchase Requisition Exit Navigation:
Logistics -> materials management -> purchase requisition -> Display
Review status tab; note GR data
Double click on PO number
Review PO history tab
Click material document number
Review material document and go back
In PO, close item detail, open header, review status
Exit
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117. Example / Demo Review GL accounts Review vendor account
Navigation: Accounting -> Financial Accounting -> General Ledger -> Account -> Display Balances
Review A/P account – nothing there! Why?
Review GR/IR account
View Inventory account
Review vendor account
Navigation: Accounting -> Financial Accounting -> Accounts Payable -> Account -> Display Balances
Select and review vendor account – nothing there! Why?
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118. Receive and Verify an Invoice
Navigation:
Logistics -> Materials Management -> Invoice Verification
Input
Enter date, amount and PO number
Check “booking ok” box
Verify green light and zero balance
Automatic data entry
Vendor data, material, quantity, price, total
Save
Document (accounting ) number:
Magal and Word | Integrated Business Processes with ERP Systems | © 2011

119. Example / Demo Review Purchase Requisition
Navigation:
Logistics -> materials management -> purchase requisition -> Display
Review status tab; note invoice data
Double click on PO number
Review PO history tab
Click account document number
Review account document and go back
In PO, close item detail, open header, review status
Exit
Magal and Word | Integrated Business Processes with ERP Systems | © 2011

120. Example / Demo Review GL accounts Review vendor account
Navigation: Accounting -> Financial Accounting -> General Ledger -> Account -> Display Balances
Review A/P account – updated
Review vendor account
Navigation: Accounting -> Financial Accounting -> Accounts Payable -> Account -> Display Balances
Select and review vendor account – Updated
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121. Make payment to Vendor Navigation: Input Save
Accounting -> Financial Accounting -> Accounts Payable -> Document Entry -> Outgoing Payment -> Post
Input
Enter date, bank account, amount and vendor account
Enter to next screen
Select invoices (double click invoice amount) to be paid until “amount entered” and “assigned” are equal
Save
Document (accounting ) number:
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