Professional Documents
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The domain of logistics in SAP now includes following areas, as they could be
seen at following official site of SAP.
http://help.sap.com/saphelp_46C/helpdata/EN/bf/70463423530444e10000009
b38f83b/frameset.htm
• The source of information in this article are extracted from the official
site of sap.
SAP-Procurement 1
Procurement in SAP
In the following lines we are going to make a view about the procurement
that is part of material management, that is also written as MM in short.
What is Procurement
In the process of procurement goods or services are delivered from the
provider to requester. Normally a purchase order is raised from requester
that defines the requirements and may also include schedule of deliveries to
some supply source.
A purchase order is a formal request from client to a vendor to supply goods
or to provide services at or by the certain point of time.
Purpose of procurement
Procurement may be performed with the reference of following two scopes.
1. For storage
A. It is a kind of stock that stores at some location.
B. When moved in or out from stores then stocks are updated.
C. When ordered, system does not require an account assignment
since the material ordered assigned an account already.
D. Such type of material must have a master record.
2. For consumption
A. Material required to consume may or may not have a material
master record.
B. System demands to assign an account to the material being
ordered, that may be a cost center or a sales order, it is used as
a consumption account.
C. At receipt of material, the consumption accounts are posted.
D. Existing stocks are not affected at receipts of consumable
material.
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Forms of external procurement
There are following forms of purchasing supported by SAP.
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Organization structure
The SAP logistic permits variety of organizational constructs to handle and
manage different domains like purchasing, sales/distribution and materials.
The structure of an enterprise with the reference of purchasing is represented
by the following organizational levels.
Client
This is a grouping or combination of legal, organizational, business and/or
administrative units with a common purpose. A corporate group having many
companies may be declared as client.
Company code
This level represents an independent accounting unit within a client. Each
company code has its own balance sheet and its own profit and loss
statement. A subsidiary company or a member of a corporate group could be
considered as a company.
Plant
Operational unit within a company code, these may include production units,
branch offices, stock locations.
Purchasing organization
An organizational unit responsible for procuring materials or services for one
or more plants and for negotiating general conditions of purchase with
vendors, the purchasing organization assumes legal responsibility for all
external purchase transactions.
Purchasing group
The purchasing organization is further subdivided into purchasing groups or
buyer groups, which are responsible for day-to-day buying activities. A
purchasing group can also act for several purchasing organizations.
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Integration with other modules
Purchasing communicates with other modules in the SAP System to ensure a
constant flow of information. For example, it works side by side with the
following modules:
Controlling (CO)
The interface to the cost accounting system can be seen in all the cases of
purchase orders that are intended for direct consumption and for services,
since these can be directly assigned to a cost center or a production order.
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Purchase order process flow
A purchase order life cycle is featured with following stages.
1. Determination of requirements.
2. Supply source determination.
3. RFQ (Request for quotations) generating to vendors.
4. Receiving of quotation from vendors.
5. Comparison of quotations and vendor selection.
6. Generation of Purchase order.
7. Release of purchase order.
8. Confirmation of vendor about delivery schedule and prices.
9. Follow ups.
10. Receiving of goods.
11. Invoicing.
12. Payments.
Purchasing Document(s)
The following list shows the external purchasing documents available in the
standard SAP System.
Note: Purchase requisitions are not included in this list because it is usually
regarded as internal document and it is generated from users or MRP system
or some other component about requirement of material or service.
2. Quotation
It contains price and delivery terms and conditions defined by vendor, it also
plays vital role in vendor selection.
4.Contract
The contract is a binding commitment to procure a certain material or service
from a vendor over a certain period of time. These are represented in
following entities.
1. Centrally agreed contracts.
2. Distributed contracts.
3. Scheduled agreements.
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Structure of Purchase order
Each purchasing document is subdivided into two main areas: the header and
individual items that may be several in numbers.
The header contains information relevant to the whole document, while the
items specify the materials or services to be procured.
For example, information about the vendor and the document number is
contained in the document header, and the material description, order
quantity and delivery schedules are specified at item level.
Additional data could also be defined that provides extra information about
the item, and has no direct connection with the item procurement data.
Additional data includes account assignment data (such as cost center and
G/L account) and the PO history for an item, which contains information on
already recorded goods and invoice receipts relating to the item.
Document types are defined for RFQs, purchase orders, and contracts,
because a standard SAP system includes certain document types. However,
your enterprise can also define its own. Following document types are
already available.
• Standard
• Subcontracting
• Consignment
• Stock transfer
• External service
Release Procedure
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This component is used to set up approval procedures for purchase
requisitions or other purchasing documents.
If a purchase requisition or external purchasing document fulfills certain
conditions (e.g. the total order value exceeds $10,000), it has to be approved
(by the cost center manager, for instance) before it can be processed further.
This process of approving (clearing, or giving the "green light" to) a proposed
item of expenditure is replicated in the SAP System by the "release
procedure".
Features
Each person involved in the release procedure effects release (signifies
approval) via a release transaction, using his or her release code. Once
effected, a release can also be cancelled with the same code (that is to say,
the original status is reinstated).
o Purchase Requisition
o The external purchasing documents purchase order (PO), contract,
scheduling agreement, request for quotation (RFQ), and service entry
sheet.
• With classification
• Without classification
The two procedures are mutually exclusive (that is to say, you must decide in
favor of one of them only - you cannot use both).
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