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What is Outline Agreements? Where it fts in

purchasing process?

 

 The outline purchase agreement is often referred to as a blanket or umbrella purchase order. It is

basically a long-term agreement between the purchasing department and vendor for material orservices for a dened period of time. The purchasing department negotiates with the vendor a set of

terms and conditions that are xed for the period of agreement.

 

Which business requirements lead to use o outline

agreement?

 

1. When purchasing department want to setup long term relationship with vendor for specic

group of materials or services

. To negotiate binding conditions for purchasing !i.e. price" #uantity" discounts etc.$ without

actually releasing purchase order

%. &sing pre-negotiated o'er during day-to-day purchasing

(. Increase speed of actual purchasing to satisfy actual re#uirements

). *rovides better monitoring and control of actual release of purchase order against o'er

 

Structure o an Outline Purchase Agreement 

+n outline purchase agreement consists of the following elements,

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• ocument header, contains information relating to the entire agreement. or example" the

vendor information and header conditions are in the document header.

• Items, containing the information specic to the relevant material or service. or example,

• /tatistics on ordering activities for the item

o 0uantity or price of the item

o onditions" such as #uantity discounts and surcharges

 

Contracts v/s Scheduling agreement

 

In /+* 22 *urchasing" such agreements are subdivided into 3contracts3 and 3 /cheduling

agreements.3

 

Contracts:

• 4onger- term contract with subse#uent issue of release orders

• i'erent *5s can be released for same contract

• 2ainly used for fre#uent non-predictable re#uirements e.g. *urchasing o6ce supplies

 

Scheduling agreement

• 4onger-term scheduling agreements and delivery schedules

• /ame scheduling agreement number is used with di'erent release calls

• 2ainly used for repetitive7predictable re#uirements e.g. purchasing spare parts of a large 8eet

• an be tightly integrated with 29*

 

Contract

 

+ contract is a longer-term agreement with a vendor !one of the two forms of 3outline agreement3 in

the /+* system$ to supply a material or provide a service for a certain period of time. + number of

di'erent terms may be used for this concept in purchasing literature" including 3blanket order3"

3blanket contract3" 3systems contract3 and 3period contract3.

 

 The contract does not contain specic delivery dates or the individual delivery #uantities. These are

specied subse#uently in release orders issued against the contract when customer re#uires them.

 

Contract tpes 

When creating a contract" you can choose between the following contract types,

1. !alue contract "#$% : The contract is regarded as fullled when release orders totalling a

given value have been issued. &se this contract type when the total value of all release orders should

not exceed a certain amount.

. &uantit contract "W$% : The contract is regarded as fullled when release orders totalling a

given #uantity have been issued. &se this contract type when the total #uantity to order over the

duration of the contract is known.

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Was o Creating Contractsontract can be created in one of the following ways,

1. 2anually, :nter all the contract data manually.

. &sing the referencing techni#ue, reate a contract by referencing

a. *urchase re#uisitions

b. 90s7#uotations

c. 5ther contracts

 

Characteristics o contract: 

• ontracts are outline agreements. They do not contain details of the delivery dates for each of

the items.

•  To inform vendors of which #uantity you need for which date" you enter contract release orders

for a contract. + release order is a purchase order that references a contract.

• If a purchasing information record with conditions exists for the material and the vendor" the

system automatically suggests the net price according to these conditions when you create the

contract item.

• ontract validity period is dened in the contract header as the validity period

• or each item in a #uantity contract" you dene the target #uantity and purchase order

conditions.

 

'tem categories in contracts 

Item ategory

2 - The material is unknown

W - ;alue and #uantity are unknown

- *rocuring an external service

< - onsignment material is involved

4 - /ubcontracting material is involved

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• Item category 2 is recommended for similar materials with same price but di'erent material

numbers. or example" contract for copier paper.

• Item category W is recommended for material belonging to the same material group but with

di'erent prices. or example" contract for o6ce supplies.

•

Item category W can be used only in value contracts.• Item category 2 and W are not allowed in contract release orders.

• Item category is used for services contracts.

 

• +ccount assignment category" =&> unknown can be used in contracts. In this case" cost centerwill be determined at time of creating release order.

•  The account assignment category" =&> is denied in contract release orders. ?ou have to replace

the account assignment category with a valid account assignment category.

 

Processing contracts

 

• ontract release orders are purchase orders that are created with reference to contract.

•  The release order documentation !i.e. the #uantity released until now" and the open #uantity$

is automatically updated when you create a contract release order. This can be used for monitoring the

contract.

•  The release order document is contained in the statistics for contract item.

•  ?ou can enter source of supply in the purchase re#uisition. This ensures that the outline

agreement is referenced when the purchase re#uisition is converted into a purchase order.

• ontract release order can be created with or without reference to a purchase re#uisition.

•  The release order documentation comprises details of ordering activity relating to a contract.

 The system supplies the following data on each release order,

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a. @umber of contract release order

b. 5rder date

c. 5rder #uantity

d. 5rder value

e. 0uantity released to date

f. Target #uantity

g. 5pen target #uantity•  ?ou can list all contracts that are due to expire in the immediate future. The analysis is carried

out using the Target value and Total value released elds in the contract header" based on suitable

selection parameters

 

Centrall Agreed contract 

 The centrally agreed contract allows a central purchasing organiAation to create a contract with a

vendor that is not specic for Bust one plant. In this way" the purchasing organiAation can negotiate

with a vendor by leveraging the whole company>s re#uirements for certain materials or services.

• ontract items can relate all plants covered by a purchasing organiAation

•

+ll plants of a purchasing organiAation can order against a centrally agreed contract• &sing the plant conditions function" the centrally agreed contract allows you to stipulate

separate prices and conditions for each receiving plant. or example" di'erent transport costs.

 

SAP (ransactions

 

• reate value contract for material group !W<$ C 2:%1< 

• hange contract C 2:%< 

• 4ist display contract - 2:%4

• 2onitor contracts - 2:DE9@

 

)eerences:

 

1. help.sap.com

. /+* 22,unctionality and Technical onguration" /+* *ress

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