Enterprise Wide Information Systems

The Procurement Process

Instructor: Richard W. Vawter

University of Southern California

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.

University of Southern California

Topics
Organizational Elements and Master Data
Business Process for Procurement Reporting and Analysis

University of Southern California

Procurement
The primary SAP R/3 application modules that support the Procurement process are:

Sales & Distribution Financial Accounting

Materials Mgmt.

Controlling

Materials Management

Production Planning

Purchasing Goods Receipts Invoice Verification

Quality Mgmt. Plant Maintenance

R/3
Client / Server ABAP/4

Fixed Assets Mgmt.

Project System

Workflow

Production Planning

Human Resources

Industry Solutions

Purchase Requirements
Payment Processing Materials Valuation

Financial Accounting

University of Southern California

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

Company Code

Plant

Storage Location

Purchasing Organization

Purchasing Group

University of Southern California

Master Data
The following master data is used in the Procurement cycle:

Material master Vendor master

University of Southern California

Material Master Primary Views

Basic Data
Material Resource Planning Stocks in Inventory Purchasing

Sales
Work Scheduling Quality Management

Accounting
Storage Warehouse Management

Forecasting
Classification

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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

University of Southern California

Topics
Organizational and Master Data
Business Process for Procurement Reporting and Analysis

University of Southern California

Procurement Cycle
The procurement cycle may consist of eight processes:

Purchase Order Purchase Order

8. Payment

1. Requirements determination 2. Source determination

7. Invoice verification

Purchase Order Purchase Order

6. Goods receipt and inventory management

3. Requisition assigned to a Vendor

5. Order follow-up

University of 4. Order processing Southern California

Business Process Flow for Procurement

The main documents and transactions in the Procurement process are:

Purchase
Requisition

Purchase Order

Goods Receipt

Invoice Posting

Planning, Reporting, and Analysis

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. University of Southern California

Purchase Requisition Processing

or

Material Resource Planning

Direct Entry
Purchase Order Purchase Order Purchase Order

Purchase requisition

Release strategy

Purchase order

Determine source of supply

University of Southern California

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
Requisition

Purchase Order

Goods Receipt

Invoice Posting

Planning, Reporting, and Analysis

University of Southern California

Purchase Order Processing

Purchase Purchase Order Order Direct Entry or Purchase Requisition
Purchase Order Purchase Order Purchase Req.

Standard Standard Sub Subcontract contract Consignment Consignment Third-party Third-party

Statistics Order History

Stock material Consumable material Service

Account assignment
(cost center, asset, project)

University of Southern California

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
Requisition

Purchase Order

Goods Receipt

Invoice Posting

Planning, Reporting, and Analysis

University of Southern California

Goods Receipt for Stock Material

Entering the goods receipt increases the inventory level of a material that is procured for stock.
Purchasing documents
Items 1. 2. 3.

Goods Receipt

Warehouse / stores

Vendor

Inventory Management (MM module) controls and records all goods movement, form purchase order receipt through the plant, to consumption
University of Southern California

Results of a Goods Receipt Posting

Transaction documents are created both for materials management and finance.
Accounting document G/L accounts: Consumption account GR/IR account Material document Stock quantity Consumption statistics

Goods Receipt Posting

Point of consumption Cost center Order

Goods receipt slip Purchasing data: Order item, Order history

Transfer Order University of Southern California

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

Purchase
Requisition

Purchase Order

Goods Receipt

Invoice Posting

Planning, Reporting, and Analysis

Payment will then be made later based upon the open invoices posted on the system University of Southern California

Invoice Verification Environment

Invoice verification accesses data from purchasing, inventory management, material master, and vendor master files.
G/L accounts
Purchase Order

Assets
Purchase Order Purchase Order

Cost centers
Vendor Invoice

Projects Invoice verification Orders

Goods Receipt Material master Vendor master

Posting Postingan aninvoice invoicein inthe theR/3 R/3System System updates updatespurchasing purchasingand andaccounting accountingdata data

University of Southern California

Vendor Payment
Accounts payable reads the invoice file and pays all posted invoices due. (Payment runs can be automated to occur at specific times.)
Vendor Bank Payment Payment program program
1000

Financial Accounting

1000

Motor Sports International

1234 Main Street New York, NY 10181

1449
Date _______________

Pay to: ________________________________________ ________________________________________________________ _______________ _________________ 12930 39040 2020 20202 10923 1449

Released Invoice

University of Southern California

Procurement Integration
Purchase Order

MM

PP
Purchase Order

FI

FI

Goods Receipt

Invoice Verification

Invoice

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Topics
Organizational and Master Data
Business Process for Procurement Reporting and Analysis

University of Southern California

Reporting and Analysis

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

University of Southern California

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.

University of Southern California

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

Inventory Controlling Shop Floor Info System

The LIS extracts data from the operative applications; offering it in many different views, the depth of which is determined by the user.
Logistics Information Library
Sales Information System Purchasing Information System Inventory Controlling Shop Floor Information System Maintenance Information System

Logistics Information Systems

Quality Mgmt Information System

R/3
Sales and Distribution (SD) Materials Management (MM) Production Planning (PP) Plant Maintenance (PM) Quality Management (QM)

Logistics Processing Systems

In Summary
The basic procurement process includes:

Purchase requisition Purchase order

Goods receipt

Invoice processing

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