procurement processes egn 5620 enterprise systems configuration spring, 2012 procurement processes...

Procurement Procurement Processes Processes

EGN 5620 Enterprise Systems Configuration EGN 5620 Enterprise Systems ConfigurationSpring, 2012Spring, 2012

Procurement ProcessProcurement Process

Concepts & TheoriesConcepts & Theories

January 2008January 2008

© SAP AG - University Alliances and © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All The Rushmore Group, LLC 2008. All rights reserved. rights reserved. 33

Procurement ProcessProcurement Process1. Requirements Determination – Requisition

request2. Request for Quotation (RFQ)3. Vendor Selection4. Order Processing - Purchase Order 5. Order Tracking 6. Goods Receipt and Inventory Management7. Invoice Receipt and Verification8. Payment



Purchase Requisition (Request)Purchase Requisition (Request)

Is an internal documentRequests a certain quantity of certain

material (or service) on a certain dateIs generated:

◦Manually◦MRP (automatically), or◦Sales orders, etc.

With an optional request approval (or release) procedure



Purchase Requisition SourcesPurchase Requisition SourcesNon-inventory items: manually specified

by the user department for:◦Office supplies,◦Project-specific materials, and◦Prototype materials

Inventory items: automatically created by a MRP/MPS planning mechanism for:◦Plant Maintenance◦Production Orders◦Sales Orders



Purchase Requisition DataPurchase Requisition DataDefault data for line items (from the material

master, vendor info record, & user preferences)◦Delivery dates, ◦Plants, storage location◦Purchasing groups, etc.

Individual line item data◦Material, ◦Quantity, ◦Delivery date

Account assignment (if required)◦Cost center, ◦General Ledger accounts, ◦Project number, etc.

Check data



Quotation ProcessQuotation Process

1. Request for Quotation (RFQ)2. Maintaining a Quotation3. Comparison of Prices4. Creating a Contract 5. Creating a Release Order



Request for Quotation (RFQ)Request for Quotation (RFQ)

Is an invitation to a vendor to indicate their terms and conditions (in particular, their price) for the supply of a material (or service) by submitting a quotation

Identifies the required material, quantity, and delivery dates

Request for QuotationRequest for Quotation

An RFQ is an invitation to a vendor by a Purchasing Organization to submit a bid for the supply of materials or services◦ The accepted quotations will generate Purchasing

Information Records◦ Perform Quotation Price Comparisons◦ Finally Select a Quotation

PurReq.

generateRFQ

Vendor 1

Vendor 2

Vendor 3

Quote

Quote

Quote

P.O.45…12

RejectLetter

Eval.



Maintaining a QuotationMaintaining a Quotation

1. Enter each vendor's quotation in the associated Request for Quotation (RFQ)

2. Compare prices using the price comparison list

3. Store the best quote in an info record4. Optionally, send rejection letters to the

losing bidders

Vendor EvaluationVendor Evaluation Evaluate vendors (for sourcing) with respect to:

Price◦Price Level◦Price History

Quality◦Goods Receipt◦Quality Audit◦Complaints/Rejection level

Delivery performance◦On-time delivery◦Quantity reliability◦Compliance with shipping instructions◦Confirmation Date

A scoring range (1 -100) may be used with weight factors to score each identified/qualified vendor.



Comparison of PricesComparison of Prices

Compares the prices from all quotations from the competitive bidding process using a price comparison list

Ranks the quotations in the comparison list by item from the lowest to highest price



Creating a Release OrderCreating a Release OrderRelease order is a purchase order that

references a contract; it specifies:◦Number of the contract◦Quantity to be released◦Delivery date

When a release order is created, release order documentation is automatically updated against the contract (including open quantity, quantity released to date, total value)



Creating a Release Order (2)Creating a Release Order (2)The vendor data, price data, and the

delivery terms and conditions are copied directly to the release order

Release orders can be created from a proposed purchase requisition generated off a MRP run (net requirements)◦Automatically

◦Manually◦



Purchase OrdersPurchase OrdersPurchase Orders are:

◦ a formal request to a vendor to provide materials or services◦ An internal planning and tracking tool

Purchase Orders specify:◦ Vendor◦ Material and/or service◦ Quantity and price◦ Delivery dates◦ Terms of payment

A purchase order can be for variety of purposes:◦ Standard Stock or Consumption◦ Services◦ Subcontracting◦ Consignment

Procurement ProcessesProcurement Processes

SAP Implementation SAP Implementation



Business Process IntegrationBusiness Process Integration

FI

MM

SD

Rules

FI

MM

SD

Master D

ata

FI

MM

SD

FI SDMM



Business Process IntegrationBusiness Process Integration

Purchase Process



Rules (review)Rules (review)

Rules define the parameters for Master Data and Transactions

Rules determine functionality for Master Data and Transactions

Rules are relatively fixedRules change, when corporate policy

changes


© SAP AG - University Alliances and © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All The Rushmore Group, LLC 2007. All rights reserved.rights reserved. 2020

Rules (review)Rules (review)

Material Management• Fiscal Periods• Account Groups• Material Types• Plant Parameters• Purc./Rec./Inv.

Tolerances • Automatic Account

Assignment• Reservations• Material Group• Loading Group



Transaction Data (review)Transaction Data (review)

Transaction data are application data; each transaction is dynamic and unique, unlike master data and organization data which do not change very often.

Transaction data use (is comprised of) organization data, master data, and rules

Transaction data includes internal and external exchanges that describe business activities



Purchasing in SAP R/3 (review)Purchasing in SAP R/3 (review)The purchasing process resides in the Materials

Management (MM) module of SAP R/3 as well as the Finance (FI) module

Master data for the purchasing process exists in the (MM) and (FI) modules

The purchasing process may interface with the modules below:◦ Production Planning (to plan for production), ◦ Quality Management (to check quality at receipt), and ◦ Warehouse Management (to put away)

January 2008January 2008© SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. reserved. 2323

Procurement Process (Procure-to-Pay)

Purchase Requisition

Paymentto Vendor

Notify Vendor

VendorShipment

InvoiceReceipt

GoodsReceipt

Purchase Order

3-WayMatch

Create & Save Purchase OrderCreate & Save Purchase Order

Purchase Purchase Order in SAPOrder in SAP

Three sections in a purchase order:◦ Header◦ Item overview◦ Line item

Purchase Order StructurePurchase Order Structure

PurchaseOrder

45......01

Header

Vendor CompanyPurch. Org. DatePurch. Org. group PO Price

Item Overview

Materials Price/UofMQuantities CurrencyDelivery Date Plant

Line Item

PO History TolerancesLine Price StorageDelivery Schedule



Purchase Order Structure:Purchase Order Structure:HeaderHeader

Header - information specific to the entire purchase order◦Vendor◦Purchase organization data◦Condition (total purchase price)◦Partner◦Payment process◦Status



Purchase Order Structure:Purchase Order Structure:Line ItemsLine Items

Line item – purchasing information required for the item◦Item category◦Material ID and description◦Material or service quantity◦Delivery date◦Net price◦Currency◦Plant◦Storage location◦Measurement unit



Purchase Order Structure:Purchase Order Structure:Item DetailsItem Details

◦Material data for the item◦Quantity/weight◦Delivery schedule◦Invoice◦Conditions (Purchasing price for the item)◦Delivery address◦Confirmation◦Condition control◦Subcontracting



Purchase Order: Output FormatPurchase Order: Output Format

Printed and mailedE-mailElectronic Data Interchange (EDI)Faxed (hardcopy or electronic)eXtensible Markup Language (XML)



Search Purchase OrdersSearch Purchase OrdersYou can search for the purchase order

number with◦Material number, ◦Vendor number, etc.

MM: Goods ReceiptMM: Goods Receipt

PurchaseOrder

45......01

Vendor

Notify Vendor

ShipmentReceipt



Goods Receipt – Movement TypesGoods Receipt – Movement Types

Movement types - stock transactions◦Goods receipt (from a vendor or production)◦Goods issue (to customer or production/use)◦Stock transfer (from one SL to another)

Movement type determines which◦Quantity fields are updated◦Stock types are updated◦General Ledger (G/L) stock or consumption

accounts are updated◦Fields are displayed during document entry

Material MovementsMaterial MovementsWhen a goods movement takes place it is

represented by a Movement TypeMovement types are three-digit keys used to

represent a movement of goods101 – goods receipt into warehouse102 - reversal of goods receipt for purchase

order into warehouse/stores103 – goods receipt into GR blocked stock122 – return delivery to vendor501 - receipt w/o purchase order into

unrestricted-use stock

Goods ReceiptGoods ReceiptGoods receipt is a goods movement

activity in which we accept goods into our system.

If materials are delivered against a purchase order we will reference that order and SAP can: ◦ retrieve data from the PO for us to verify:

material, quantity, and so on◦ Update inventory G/L account automatically◦ Update purchase order history with the receipt◦ Update physical inventory



Goods Receipt – DestinationsGoods Receipt – Destinations

Goods receipt into (destined for) the warehouse◦ SAP increases total valuated stock by the delivered quantity. ◦ SAP updates the stock value at the same time.

Goods receipt into consumption◦ SAP only updates the consumption statistics in the material

master record◦ SAP does not update the consumption statistics if the goods

movement posting uses the special stock types: sales order stock type and project stock.

Goods receipt posted into blocked stock◦ SAP maintains the same stock level. ◦ SAP only records it in good receipt block stock of the purchase

order history.Note:

◦ If goods receipt is being posted into a storage location where data does not yet exist for the material, SAP automatically creates a storage location data in the material master record.



Goods Receipt – EffectsGoods Receipt – Effects

Purchase Order (PO) history and Purchase Order (PO) updated

Material Master - stock and value updatedNotification of goods receipt issued

(optional)Transfer request to the Warehouse

Management module (if active)



Goods Receipt – Effects Goods Receipt – Effects (continued)(continued)

Material and financial documents created and/or updated

Stock and consumption accounts updatedInspection notification in the Quality

Management (QM) module - if active



Goods Receipt – Account PostingsGoods Receipt – Account Postings

Inventory account is debited at standard price

Goods Receipt/Inventory Receipt (GR/IR) clearing account is credited at purchase order price

Price difference account is debited (credited) with difference between standard price and purchase order price

Goods Receipt – Account postingGoods Receipt – Account posting

Purchase requisition

Purchase orderMaterials Management (MM) and Financial Accounting (FI)

via automatic account assignment

Goods receipt

No impact onFinancial Accounting (FI)

Dr Cr

Inventory (account)

$100

Dr Cr

GR / IR

$100



Invoice Receipt ProcessInvoice Receipt ProcessTasks:Engage in 3-way match to validate the invoice.Enter PO number to retrieve the PO and view

(verify) ◦ Open dollar amount. ◦ Quantity, ◦ Price, ◦ receiving date, ◦ Vendor name

Enter the invoice number and the dollar amount to be paid

Simulate invoice postingPost the invoice in SAP



3-Way Match for Payment3-Way Match for Payment

PurchaseOrder

GoodsReceipt

InvoiceReceipt

Debit Credit

PaymentProgram

Verification

Invoice Processing - 3-Way MatchInvoice Processing - 3-Way MatchIncoming Invoices are reference against a Purchase Order to

verify their content, prices, and arithmetic.If discrepancies arise between the purchase order or goods

receipt and the invoice the system with generate a warning or an error◦ Depending on system configuration the difference could cause the

system to Block the Invoice

Purchase order- Target quantity -

- Target price -

Goods receipt - Actual quantity -

Invoice receipt- Actual price -



Invoice Verification - 3-way matchInvoice Verification - 3-way match

Matches the vendor’s invoice to the purchase order and the goods receipt (3rd part of 3-way match)

Matches price and quantityUpdates the purchase order and its

historyUpdates accounting information

Financial effects of Invoice PostingFinancial effects of Invoice Posting

When an invoice is posted, SAP shifts the liability ◦From the Goods Receipt/Invoice Receipt

account (for the purchase order) ◦To the vendor account

Upon posting, SAP:◦Updates the Purchase Order◦Updates the Material Master◦Creates an Accounting Document◦Initiates the payment process within

Financial Accounting

Invoice Receipt Reconciliation Invoice Receipt Reconciliation AccountAccount

Amount owed isassigned and transferred to

vendor account payableInvoice receipt

Dr Cr

Vendor

$100

Dr Cr

GR / IR

$100

Dr Cr

A/P

$100 automatic

posting

Accounts Payable Accounts Payable Reconciliation AccountReconciliation Account



Accounts Payable (AP)Reconciliation

950

250

Vendor 100435

200

Vendor 100234

100

Vendor 100621

400

Vendor 100846



Invoice PaymentInvoice Payment

Selects invoices for payment based on the payment terms in the vendor master or purchase order

Generates payment for released invoicesUpdates accounting information



Accounts Payable Settlement Accounts Payable Settlement ProcessProcess

Determines:◦Which open items to be paid◦When they will be paid◦Which bank to make payment◦Payment medium◦Who will get paid

Payment process creates a financial accounting document to record the transaction

Payment to VendorPayment to VendorCan be done automatically or manually

◦Post Outgoing Payment vs. Payment ProgramElements of the Payment Transaction:

◦Payment Method◦Bank from which they get paid◦Items to be Paid◦Calculate Payment Amount◦Print Payment Medium

Process will create a financial accounting document to record the transaction

Vendor PaymentVendor Payment

Amount owed is paid tovendor and account payable

is reducedBank

Dr Cr

A/P

$100

Dr Cr

Bank’s

$100

Vendor’s

Dr Cr

$100

automatic posting

(FI – MM) Integration Points(FI – MM) Integration Points

Invoice Receipt

Payment Program

Goods Receipt

VendorDr Cr

GR / IR

$100

BankDr Cr

Inventory

$100 $100 $100

Dr CrDr Cr$100 $100

AP Dr Cr

$100 $100

automatic posting

PEN, Inc. PEN, Inc.

Procurement Processes

33

600

Cxxx

xxx

Pxxx xxx

Check PO History (ME23)Check PO History (ME23)



Check PO History (continued)Check PO History (continued)



Check InventoryCheck Inventory



Exercises:Exercises:

100. Create a Purchase order for Slick Pens101. Create a purchase order for premier pens102. Create a purchase order for Promotions Ltd.103. Create receipts for the purchase orders104. Create an invoice receipts from vendors105. Post payments to vendors106. Display vendor line items107. Create purchase outline agreement (contract) for Stock item

procurement processes egn 5620 enterprise systems configuration spring, 2012 procurement processes...

Documents

quotation rfq

quotation process

data slide

sap ag university alliances

rushmore group

rfq vendor

quotation pur

vendors quotation