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Procurement 4 and Payment Process

Procurement process
Procurement process – the organization acquires the basic materials that it uses to produce goods and services.

MM Menu Options in the SAP System

Procurement Process

Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Procurement Process - Steps
1. Determination of requirements (Requisitions) – By user - The user department responsible can pass a requirement for materials to the Purchasing department manually, via a purchase requisition.

– By MRP - If you have set a MRP procedure for a
material in the material master, then MRP will automatically generate a purchase requisition.

2. Approve requisition – purchase requisition created
has to be approved by the relevant authorities.

Create Purchase Requisition

Enter the valuation Price and click enter

Purchase Requisitions
Manual – users Automatic – MRP

Supply Chain Management

Supplier Relationship Management

Determination of requirements

Determination of source of supply

Procurement Process (cont..)
3. Determination of the source of supply – Source identification - ERP supports the buyer responsible in many different ways when determining sources of supply. Source can be from internal (eg. subsidiary, factory) or external (eg. vendor).

– RFQ – A pre-qualification and bid list may be prepared. You can use determination of the source of supply to create requests for quotation (RFQs) to qualified list of vendors. Quotations received are then entered into the system.

RFQ Process

Create Request for Quotation

RFQ is created

Converting a Purchase Requisition to a Purchase Order

The Purchasing system adopts information from the requisition and the quotation to create a purchase order.

Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Procurement Process (cont..)
4. Vendor selection - The system supports you during
vendor selection by : – Comparing the prices of the different quotations. By comparing quotations, you can establish, for example, the most favorable vendor. – You can send rejection letters automatically.

5. Purchase order processing – Create PO – From the approved purchase requisition and approved quotation, you would create purchase orders (for goods). The system helps you with the entries. Contracts are used for services, with both parties signing. – Approve PO – PO created must be approved by the relevant authorities. – Send PO – PO created can be sent : manually (mail) or electronically (EC).

Communicating with vendors

Magal and Word | Integrated Business Processes with ERP Systems | © 2011

The Purchase Order Process

AutoCreate Requisition pool Approve PO

Manually create

Accept Receive against PO

Revise

Control Match invoices against PO

Maintain documents

Creation of Purchase Order

Purchase order details displayed

Procurement Process (cont..)
6. Purchase order monitoring – The buyer can monitor the processing status of the purchase order at any time online. The buyer can, for example, determine whether goods or an invoice have been received for the corresponding purchase order item.

– The system also supports dunning procedures. A predefined procedure specifying how customers vendors are dealt with legally on credit terms. or

– Expediting – involves monitoring all steps of the
procurement cycle eg. periodic visits, telephone followups, check delivery progress, back-up suppliers or using faster shipping methods.

Procurement Process (cont..)
7. Goods receipt – PO verification - ERP allows the store hand to check/match the materials delivered details with the PO details to verify the accuracy of purchases before receiving.

– Data entry - The system compares the goods receipt
quantity with the purchase order quantity. The store hands also checks for quality of goods received against quality specs and physically count the quantity...
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