University of Southern California Enterprise Wide Information Systems The Procurement Process Instructor: Richard W. Vawter

University of Southern California

Enterprise Wide Information Systems

The Procurement Process

Instructor: Richard W. Vawter


Objectives

Rather than selling, as you studied in the Customer Order Management process, you will now be focusing on the purchasing process. You will be able to:

Describe the basic business process of procuring stock materials in an ERP System.

Discuss the integration points in procurement to Financial Accounting and Inventory Management.

Execute the procurement process in the SAP R/3 System.

Discuss the reporting and analysis tools used by R/3 in the procurement cycle.


Topics

Organizational Elements and Master Data

Business Process for Procurement

Reporting and Analysis


Procurement

The primary SAP R/3 application 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

MaterialsMgmt.

ProductionPlanning

FinancialAccounting

Controlling

Fixed AssetsMgmt.

QualityMgmt.

PlantMaintenance

HumanResources

Workflow

IndustrySolutions

R/3Client / Server

ABAP/4 ProjectSystem


Organizational Elements

The SAP R/3 Procurement business process uses the following organizational elements:

Company Code Plant Storage Location

Purchasing Organization Purchasing Group


Master Data

The following master data is used in the Procurement cycle:

Material master

Vendor master


Material Master Primary Views

Basic Data

Material Resource Planning

Stocks in Inventory

Accounting

Storage

Warehouse Management

Purchasing

Sales

Work Scheduling

Quality Management

Forecasting

Classification


Vendor Master

The Vendor Master includes all data necessary for processing business transactions and corresponding with vendors.

Information is shared between the accounting and purchasing departments.

All data is grouped into three categories: General data

Company code data

Purchasing data


Topics

Organizational and Master Data




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


7. Invoice verification


Business Process Flow for Procurement

The main documents and transactions in the Procurement process are:

Planning, Reporting, and Analysis

Purchase Requisition

Purchase Order

GoodsReceipt

InvoicePosting

Note: Payments to vendors are usually made at specified times (e.g. at the end of the month).

Payment amounts are determined according to the ‘open’ invoices posted on the system.


Purchase Requisition Processing

Material ResourcePlanning

Direct Entry

Determine source of supply

Purchase requisition Release strategy


Purchase Order

Purchase order

or


Purchase Orders

A purchase order is a formal request to a vendor to provide certain materials or services under specific conditions (quantity, price, delivery date, etc.)



Purchase Order

GoodsReceipt

InvoicePosting


Purchase Order Processing


Purchase Req.

ServiceConsumable material

Stock material Account assignment(cost center, asset,

project…)

PurchaseOrder

• Standard• Sub contract• Consignment•Third-party

PurchaseOrder

• Standard• Sub contract• Consignment• Third-party

Statistics

Order History

Direct Entryor PurchaseRequisition


Goods Receipt

When goods are received from a purchase order, the item data is copied from the purchase order into the goods receipt document.



Purchase Order

GoodsReceipt

InvoicePosting


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

Purchasingdocuments

Items1.2.3. Warehouse / storesGoods

Receipt

Vendor


Results of a Goods Receipt Posting

Transaction documents are created both for materials management and finance.

Goods ReceiptPosting

Accountingdocument

Stock quantityConsumption statistics

Point of consumptionCost center Order

TransferOrder

Purchasing data:Order item, Order history

Goods receiptslip

Materialdocument

G/L accounts:Consumption account

GR/IR account


Invoice Processing

This last step in the procurement process includes invoice verification and updating accounts payable in the FI module.



Purchase Order

GoodsReceipt

InvoicePosting

Payment will then be made later based upon the ‘open’ invoices posted on the system


Invoice Verification Environment Invoice verification accesses data from purchasing,

inventory management, material master, and vendor master files.

PurchaseOrder

VendorInvoice

GoodsReceipt


Invoiceverification

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


Vendor Payment

Accounts payable reads the invoice file and pays all posted invoices due. (Payment runs can be automated to occur at specific times.)

Motor Sports International1234 Main StreetNew York, NY 10181

1 4 4 9

Date _______________

Pay to: ________________________________________

________________________________________________________

_______________

12930 39040 2020 20202 10923 1449

_________________

Vendor

1000

Bank

1000Paymentprogram

Paymentprogram

ReleasedInvoice

FinancialAccounting


Procurement Integration

Purchase Order

Goods Receipt

Invoice Verification

PP FI FI

MM

Purchase Order

Invoice


Topics

Organizational and Master Data





Standard Reporting provides List Displays (pre-defined programs) by: Vendor

Material

Account assignment

Material group

Purchase order number

Tracking number

General Analysis

Order Value Analysis

Inventory Transaction Analyses


Logistics Information System (LIS)

The Logistics Information System (LIS) contains several information 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) The LIS exists for the entire logistics system in R/3

The LIS contains several information systems such as: 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

SalesInformationSystem

PurchasingInformationSystem

InventoryControlling

Shop FloorInformationSystem

MaintenanceInformationSystem

Quality MgmtInformationSystem

Sales andDistribution

(SD)

MaterialsManagement

(MM)

ProductionPlanning

(PP)

PlantMaintenance

(PM)

QualityManagement

(QM)

Logistics Information Library

R/3

LogisticsInformation

Systems

LogisticsProcessing

Systems

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

Documents

University of Southern California Enterprise Wide Information Systems The Procurement Process Instructor: Richard W. Vawter