Chapter 4 The Procurement Process 1 Magal and
- Slides: 60
Chapter 4 The Procurement Process 1 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Learning Objectives 1. Describe the major organizational levels associated with the procurement process. 2. Discuss the four basic categories of master data that are utilized during the procurement process. 3. Explain the key concepts associated with the procurement process 4. Identify the key steps in the procurement process and the data, documents, and information. 2 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Learning Objectives (Continued) 5. Effectively use SAP ERP to execute the key steps in the procurement process 6. Utilize SAP ERP to extract meaningful information about the procurement process 3 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
A Basic Procurement Process 4 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Outline Organizational data Master data Key concepts Process Reporting 5 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Organizational Data Client Company code (CC) Plant Storage location (S Loc) Purchasing organization (P Org) Purchasing group 6 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 7 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 8 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
GBI Storage Locations 9 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 10 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 11 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Enterprise-Level Purchasing Organization 12 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 13 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Company-Level Purchasing Organization 14 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Plant-Level Purchasing Organization Also known as plant-specific model Each plant has its own Purchasing Organization Highly decentralized 15 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Plant-Level Purchasing Organization 16 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Reference Purchasing Organization One centralized Purchase Org for high-level decisions across the enterprise Multiple CC-specific and plant-specific Purchase Org 17 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 18 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Master Data Material Master Vendor Master Purchasing info record Conditions 19 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 20 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Material Master – Views Basic data Plant / Storage Purchasing Work Scheduling Accounting MRP Forecasting Classification Sales Warehouse Management 21 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Material Master – Views Basic data Description, unit of measure, weight, material group 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 requirements (hazard, temperature, etc. ) Shelf life Weight, volume 22 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Material Master - 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) 23 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 24 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 1000 + MI 00+ TG 00 SHRT 1000 + SD 00+ TG 00 25 SHRT 1000 + US 00 + Wholesale channel SHRT 1000 + US 00 + Internet channel and Word | Integrated Business Processes with ERP Systems | © 2011 Magal
Demo 4 -1: Review Material Master Review some of the data included in a material master. 26 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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) 27 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Vendor Master Segments 28 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Data in the Vendor Master 29 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Vendor – General Data Client-level data Valid across all CC in a client Examples Name, Address Communication (phone, fax) Search term 30 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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) 31 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Vendor – Purchasing Data Separate for each Purchasing Organization Applies to the specified Purchase Org Examples Partner functions (vendor, invoicing party, payment recipient) In. Co. Terms: defines responsibilities and costs of shipment Freight, insurance, customs clearance, locations 32 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Demo 4 -2: Review Vendor Master Review some of the data included in a vendor master. 33 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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) 34 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Purchasing Info Record 35 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Purchasing Info Record 36 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Conditions Pricing Conditions Gross price Discounts and surcharges Freight / shipping Obtained from Purchasing info records Contracts and agreements Other sources 37 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Demo 4 -3: Review Purchasing Info Records Review data in a purchasing info record. 38 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Key Concepts Item categories Account determination Stock type/status Goods movement 39 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Item Categories Defines the process used to procure the item Categories 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) 40 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Demo 4 -4: Review Item Categories Review various item categories used in the purchasing process. 41 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 42 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Purchase for Stock vs. Consumption 43 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Stock Types / Status Based on usability of material Unrestricted use In quality inspection Blocked stock (damaged, unusable; wrong delivery) Stock in transit 44 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Goods Movement A transaction that causes a change in stock (value or status) Categories of Goods Movement Specific Movement types 45 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Structure of a Material Document 46 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Demo 4 -5: Review a Material Document Review data included in a material document. 47 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Goods Movements Goods Receipt 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 48 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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) 49 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Demo 4 -6: Review Goods Movements and Movement Types Review various goods movements and movement types 50 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
A Detailed Procurement Process 51 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Process Steps Trigger Data Task details Outcomes 52 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
GBI Story Inventory of t-shirts (SHRT 1000) 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 53 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Elements of the Purchase Requisition Step 54 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Purchase Requisition Trigger 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 55 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Data in a Purchase Requisition 56 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Converting a Purchase Requisition to a Purchase Order 57 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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 SHRT 1000 to be delivered at the Miami plant by a specified date 58 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Demo 4 -7: Create a Purchase Requisition Create a purchase requisition for stock material. 59 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
Elements of the Purchase Order Step 60 Magal and Word | Integrated Business Processes with ERP Systems | © 2011