l12 procure
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The Procurement Process
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Objectives
- Describe the basic business process of procuring stock materialsin an ERP System.
- Discuss the integration points in procurement to FinancialAccounting and Inventory Management.
- Discuss the reporting and analysis tools used by R/3 in the
procurement cycle.
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Hierarchical Enterprise Structure
Client
highest hierarchy level, e. g. groupwith its daughter companies Settings made will affect allcompany codes
Company Code(FI) Org. Unit can present a balance sheetaccording to the legal
provisionslegally independent enterprise
Settings made will only affect the respective company code
Purchasing organization procuresmaterial or services for the assigned plants
negotiates on terms & conditions with vendorsmake contracts
is responsible for all the purchase processes
operativepurchasing is done by purchasing groups
Plant Operational facilitywithin a company code (e.g. factory, store, ...)
has its own requirements planningand inventory management
Storage location
a space for logical inventory management
S H
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Purchasing organization
purchasing group MG 0, 3purchasing organization
purchasing group MG 1, 4
purchasing group MG 2, 5
purchasing group MG 7, 8, 9plant
purchasing group MG 6
material
group
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Inventory Management with a Warehouse
Management System
client
0001plant
storage location
001warehouse number
001storage type
05-04-03
002
05-04-04storage bin
MM
WM
company code
0001ABC inc.
0001Jones inc. 0002Model Ltd.
purchasing organization
0001
0001 0002 0003
0002 0003 0004 0001
0002 0003 0004
distrib.-center factory
(physical stock)
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The Module MM Main Functions
Maintenance of the material master record(different views) Material requirements planning
Materialprocurement:handling of the documents for
- purchase requisition
- request, quotation- vendor selection
- purchase order, outline agreement
- vendor master record
Inventory management- goods movement, material valuation
Invoice verificationreferring
purchase orders, goods received documents, delivery
notes etc.
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MM interdependencies to other modules
MM
material master
purchasing
requirements plan.
inventory mgmt.
invoice verification
SDsales and
distrib.
PM
plantmaintenance
QM
qualitymanagement
PPproductionplanning
Logistics
FI
financial acc.
CO
controlling
AM
fixed assets mgmt.
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Basic Data
Master records - include information about1. vendors
2. materialand services to be procured
3. the relation between 1.and 2.(purchasing info record)
e.g. prices / terms and conditions
bills of material for
- production planning
- purchasing
- sales and distribution
- withdrawal of Material
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invoice entry
invoice verification
payment handling
request for quotation
quotation processing
purch. order handling
Structure of the Vendor Master Record
General data
name
address
control data
accounting data
bank account
acc. maintenance
payment
purchasing
terms and cond.
partner functions
currency
utilization
for each
purchasing
organization
client wiede or
for each
company code
client wide
area of validitysections
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Views on the Material Master Record
each view is maintained by a certain user department of the firm
accounting: valuat ion- und calculat ion-specif icinformation
requirements planning: information about mater ial requ irementsplannin g (e. g. reorder po int)
purchasing: e. g. responsible purchasing group, order unit
engineering: technical information storage: information about warehousing , mater ial mo vements, ...
forecast:information about the forecast ing of th e mater ial requ irements
S & D: informationen about sales o rdersand pr ice determ inat ion
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purchasing info record
info record
pricesterms & cond.
PO statisticstolerance levels
date
quotation
order
outlineagreement
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Procurement
The primary SAP R/3application modules that
support the Procurement
process are:
- Materials Management Purchasing
Goods Receipts
Invoice Verification
- Production Planning Purchase Requirements
- Financial Accounting Payment Processing
Materials Valuation
Sales &Distribution
Materials
Mgmt.
Production
Planning
FinancialAccounting
Controlling
Fixed Assets
Mgmt.
QualityMgmt.
Plant
Maintenance
Human
Resources
Workflow
Industry
Solutions
R/3Client / Server
ABAP/4 ProjectSystem
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outline agreem.
PO
Purchasing Process
MM
X X X
X X
determination: requirements
X X X
X X
determination: source of supply
vendor 1
vendor 2
vendor selection
vendor
PO
PO
purchase order processing
PO monitoring
goods received &
inventory mgmt.
PO invoice?=
invoice verification
?
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Procurement Cycle
The procurement cycle may consist of eight processes:
8. Payment
3. Requisition assigned
to a Vendor
5. Order follow-up
2. Source
determination
1. Requirements
determination
4. Order processing
Purchase OrderPurchase Order
6. Goods receipt and
inventory management
Purchase OrderPurchase Order
7. Invoice verification
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Business Process Flow for Procurement
The main documents and transactions in the Procurementprocess are:
Planning, Reporting, and Analysis
Purchase
Requisition
Purchase
Order
Goods
Receipt
Invoice
Posting
- Note: Payments to vendors are usually made at specifiedtimes (e.g. at the end of the month).
- Payment amounts are determined according to the openinvoices posted on the system.
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Purchase Requisition Processing
Material Resource
Planning
Direct Entry
Determine source of supply
Purchase requisition Release strategy
Purchase OrderPurchase Order
Purchase Order
Purchase order
or
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Purchase Orders
A purchase order is a formal request to a vendor to providecertain materials or services under specific conditions
(quantity, price, delivery date, etc.)
Planning, Reporting, and Analysis
Purchase Requisition
Purchase
Order
Goods
Receipt
Invoice
Posting
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Create Purchase Order (PO)
1
vendor known
purch. order
vendor 2
2
vendor not known
terms & cond.
outline
agrement
source list
vendor
info record
3
assigned purchase
requisition exists
(from user department)
purch. req.
vendor 2
purch. order
purch. order
P h O d P i
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Purchase Order Processing
Purchase OrderPurchase Order
Purchase Req.
Service
Consumable material
Stock material Account assignment(cost center, asset,
project)
Purchase
Order
Standard
Sub contract
Consignment
Third-party
Purchase
Order
Standard
Sub contract
Consignment
Third-party
Statistics
Order History
Direct Entry
or Purchase
Requisition
G d R i t
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Goods Receipt
When goods are received from a purchase order, the itemdata is copied from the purchase order into the goods
receipt document.
Planning, Reporting, and Analysis
Purchase Requisition
Purchase
Order
Goods
Receipt
Invoice
Posting
G d R i t f St k M t i l
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Goods Receipt for Stock Material
Entering the goods receipt increases the inventory level
of a material that is procured for stock.
Inventory Management (MM module)
controls and records all goods movement,
form purchase order receipt through the
plant, to consumption
Purchasing
documents
Items
1.2.
3. Warehouse / storesGoods
Receipt
Vendor
R lt f G d R i t P ti
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Results of a Goods Receipt Posting
Transaction documents are created both for materialsmanagement and finance.
Goods Receipt
Posting
Accounting
documentStock quantity
Consumption statistics
Point of consumption
Cost center Order
Transfer
OrderPurchasing data:
Order item, Order history
Goods receipt
slip
Material
document
G/L accounts:
Consumption account
GR/IR account
P ti O d E t (G d R i t)
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Posting an Order Entry (Goods Receipt)
MM
Logistics
purchasing req. planning
inventory
controlling
invoice
verification
goods receipt
inventory mgmt.
goods issue. transferposting
SDsales and
distrib.
PM
plant
maintenance
QM
quality
management
PPproductionplanning
FI
financial acc.
CO
controlling
AM
fixed assets mgmt.
I i P i
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Invoice Processing
This last step in the procurement process includes invoiceverification and updating accounts payable in the FI module.
Planning, Reporting, and Analysis
Purchase Requisition
Purchase
Order
Goods
Receipt
Invoice
Posting
- Payment will then be made later based upon the openinvoices posted on the system
I i V ifi ti
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Invoice Verification
input
information invoice verification
output
information
ordersactions:
enter invoice
verify invoice post invoice
update
relevant data
(re-edit
invoice)
goods receipt
master data:
material
vendorsaccounts
terms & cond.
financial
accountingasset
management
cost accounting
I i V ifi ti E i t
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Invoice Verification Environment
Invoice verification accesses data from purchasing,
inventory management, material master, and vendormaster files.
Purchase
Order
Vendor
Invoice
Goods
Receipt
Purchase OrderPurchase Order
Invoice
verification
G/L accounts
Assets
Cost centers
Projects
Orders
Material master
Vendor master
Posting an invoice in the R/3 System
updates purchasing and accounting data
Posting an invoice in the R/3 System
updates purchasing and accounting data
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Procurement Integration
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Procurement Integration
Purchase Order
Goods Receipt
Invoice Verification
PP FI FI
MM
Purchase Order
Invoice
Reporting and Analysis
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Reporting and Analysis
Standard Reporting provides List Displays (pre-definedprograms) by:
- Vendor
- Material
- Account assignment
- Material group
- Purchase order number
- Tracking number
General Analysis
Order Value Analysis
Inventory Transaction Analyses
Logistics Information System (LIS)
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Logistics Information System (LIS)
The Logistics Information System (LIS) contains severalinformation systems such as:
- Purchasing Information System
- Inventory Controlling
- Sales Information System
- Shop Floor Information System
LIS extracts its data from the operative applications; it
offers many different views on this information.
Logistics Information System (LIS)
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Logistics Information System (LIS)
The LIS exists for the entire logistics system in R/3
The LIS contains several information systems suchas:
- Sales Information System
- Purchasing Information System
The LIS extracts data from the operative applications;offering it in many different views, the depth of which
is determined by the user.
- Inventory Controlling
- Shop Floor Info System
Sales
Information
System
Purchasing
Information
System
Inventory
Controlling
Shop Floor
Information
System
Maintenance
Information
System
Quality Mgmt
Information
System
Sales and
Distribution
(SD)
Materials
Management
(MM)
Production
Planning
(PP)
Plant
Maintenance
(PM)
Quality
Management
(QM)
Logistics Information Library
R/3
Logistics
Information
Systems
Logistics
Processing
Systems
In Summary
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In Summary
The basic procurement process includes:
- Purchase requisition- Purchase order
Procurement master data includes the vendor and material
master files.
At various times during the Procurement process,integration occurs between the PP, MM and FI modules.
The two reporting tools used in the procurement
environment are:
- Standard Reporting List Displays General Analysis Inventory Analysis
- Logistics Information System
Purchasing Information System Inventory Controlling System
- Goods receipt- Invoice processing