Materials and Suppliers – Strategic Procurement

Richard Byrom
Oracle Applications Consultant

Enterprise Resource Planning Seminar – 24th May 2002

 Objective

To illustrate how
ERP systems add value
to the procurement
process
 Procurement Process
Requisitions

Negotiations Purchase
& Awards Orders

Catalog
Content Sourcing Ordering
Management Receiving

Analysis

Supplier
Management Payment

Supplier
Performance
Procurement Process
Requisitions

Purchase
Orders

Ordering
Receiving

Payment
 Without ERP Systems in Procurement

• Disparate and fragmented systems do not

talk to each other
• Information is not appropriately shared
between applications
• Too much paper!
• Risk of error is high
• Transactions costs are inevitably
increased
Procurement Process Failure

Requisitions

Purchase
Orders

Ordering
Receiving

Payment
Benefits of ERP systems in Procurement

• Create, edit and view purchasing documentation

on-line in one application (no re-entry of document
information i.e information flow is ensured across
applications)
• Review the current status and action history of all
purchasing documentation
• Route purchasing documentation according to
approval hierarchies
• Enables accurate and automated accounting for all
transactions
• On line approvals – less paper
• Reduced total transaction costs
Purchase Requisitions
 Why Purchase Requisitions?

• Purchase requisitions allow you to decentralise

your purchasing department by having requesters
• Purchase requisitions allow you to source your
requisition with the best suppliers and at the
lowest cost
• Purchase requisitions ensure that the appropriate
management approval is given before purchase
orders are created.
 Where Purchase Requisitions Fit
Demand

Inventory WIP MRP Order Mgmt

Import/reschedule
requisitions Internal
sales order
Order entry

Approve
Supplier
Manually Approval
create Requisition
Requisition
pool
 Business Needs Associated with
Purchase Requisitions

• Automate the procurement process

• Monitor and control spending amounts by
approval authorizations
• Simplify the interaction with suppliers
• Free buyers from daily transactions to focus on
negotiation management and supplier analysis
• Reduce administrative costs and inefficiencies
 Who Acts on Purchase Requisitions?

• Employee
• Buyer or buyer-planner
• Approvers
• Suppliers
• Purchasing staff
Purchase Orders
 Why Create Purchase Orders?

• Supplier is selected to satisfy demand for goods

or services
• Summarize all demand for a given item or category
• Supplier terms and conditions established
• Contract with a supplier: external or internal
• Business need for goods or services is formalized
Where Purchase Orders Come From

Oracle Oracle OracleOrder Other

Oracle Oracle
MRP Inventory WIP WIP
Mgmt systems
Demand

Automatically
imported
Manually
created

Requisitions
Requester

Create
purchase orders
Manually Create Purchase Orders Using
Procurement Solution
Procurement Solution enables you to:
• Create purchase orders easily
• Create purchase orders from:
– Requisitions
– Quotations
– Other purchase orders
• Create one time and repeated purchase orders
• Flexible approval and security controls
Purchase Invoices
 Entering Purchase Order Matched
Invoices : Overview
Receive invoice Enter invoice Match invoices
to PO or receipt

Approve invoice View invoice

Account for Pay invoice

invoice File invoice
 Why Enter Purchase Order Matched
Invoices?

• Match Payables invoices to purchase orders to

ensure that you pay only for the goods that you
have ordered.
• Match to purchase order receipts to ensure that
you pay only for goods that you have received.
• Payables automatically creates invoice
distributions based on the purchase order
distributions.
 You Can Set Up Controls That Require
You To Do The Following:

• Purchase order match each invoice

• Match the invoice to either a purchase order or
receipt
• Match within amount or quantity tolerances
 Accounting Entries should be created at
each stage of the process

• Record items into inventory or expenses

• Appropriate valuation of stock should take place
• Physical and Monetary Variances between
requisition and order should be recognised
• Physical and Monetary Variances between order
and invoice should be recognised
• Account for invoice and payment into creditors
 Conclusion

ERP is the best solution for your

organisations procurement problems