Outline Agreements

An Outline Agreement is longer term arrangement between a purchasing organization and

vendor regarding the supply of material or the performance of the services according to
predefined conditions over a certain time period. Here predefined conditions may be referred
to as any fixed value or some quantities etc. covered in contracts.
As name suggests it is an agreement and organization and vendor both have to follow mutual
terms in agreement.

Types of Outline Agreements:

Outline Agreement

Contracts Scheduling Agreement

Quantity Contracts (WK)

Value Contracts (MK)

Contracts:
Contract is an agreement with vendor to supply material or to provide service for certain time
period. Specific delivery date or individual delivery quantity is not contained in contracts
however; these are subsequently specified in orders issued against the contracts when
customer requires.
Consider an Example of I phone, you have one store (Purchasing Org 1) in a city and you
requires 100 I phones per year, you have vendor providing you I phone at 75000/piece. Now
you started new store (Purchasing Org2) at another location and your requirement of I Phone
now increased to 200 per year; in this case what you will do? You will try to negotiate with
vendor that now I will buy 200 quantity per year from you tell me your final value per piece
and let say vendor agrees to give you 200 quantity per year at the rate of 70000/piece. So
here vendor will make contracts like if you buy 200 I phone /year you will get it’s at 70000
INR per piece if you buy it less than it you will have to pay some more price.
If you see above example here quantity is fix hence that scenario is nothing but quantity based
contracts.
Now eventually you started buying accessories from the same vendors like headsets, charger
etc. Now you make a contract that I will fix the value per year as 50cr and will by anything in

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that value, it may be I phone or accessories. In the second scenario you fixed the value and
not quantity so second scenario is called as value based contracts.
Here many a times company makes an centrally procured contract to negotiate more as
explained in first scenario or else Purchase org 2 can procure considering Purchase org 1 as
reference Purchasing organization.

Store1 (PUR ORG 1) 75000/piece

100 Qty/Year

I phone Vendor
Contract of 200 70000/pirce
qty/year
75000/piece

Store2 (PUR ORG 2)

100 qty/year

Contract In SAP:
Tcodes Associated:
TCode Description
ME1X Buyers negotiation sheet by supplier.
ME1Y Buyers negotiation sheet by Material.
ME31K Create Contract
ME32K Edit/Change Contract
ME33K Display Contract
ME35K Release Contract
ME3L Report by supllier
ME3M Report by Material
ME9K Print/Transmit
Tables EKKO and EKPO

We can create both quantity contract and value contract, we need some master data to be
maintained
Material Master (mm01)
60000160 I phone 6s
60000162 wired headset

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60000163 Charger

Vendor Master (XK01)

0000100571 TANMAY Communications

PIR
5300010917 (For 60000160 I phone 6s)
5300010918 (60000162 wired headset)
5300010919 (60000163 Charger)

Quantity Contract:
Here we will proceed for quantity contract. First you can create PR or RFQ these both things
are optional but many company first creates PR and then creates contract. Let us consider
above mentioned problem. Let us create contract for 200 quantity of I phone 6 s

Purchase Requisition (ME51N)

0010047971 (For 60000160 I phone 6s)

Now we will create contract with T code ME31K

You can create it with existing PR or RFQ just click

on it provide PR number or RFQ Number and
Execute

Or Else you can fill the

data highlighted and
proceed

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 Select agreement type fill
all details and enter

After enter put validity date in next tab and proceed by hitting enter.You will be in next tab
as shown below;
Enter Material number
Enter Target quantity as 200.
Net price it is taking from PIR as 75000/- we need to change it

Now select item row and hit on condition tab as shown in figure

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Now make changes as shown in figure and save

You will get quantity contract created 4600000138

Now there are two methods of creating Purchase order

First by T code ME21N
Go to outline agreement in that and put your contract number and enter

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Now you can check the price is taken as 70000 INR/piece for while you just remove contract
number from PO and check the value for item it will be 75000/-

Now check and save PO

4500022415

Now second way of creating PR just enter T code ME33K,put your contract number and hit Enter

Your saved contract will be opened just go to contracts at upper left corner and go to- follow on
function-contract release order. This means you are releasing order against contract i.e. Purchase
order.

Just click on contract number and adopt it for PO . All rest

procedure is same.

Goods Receipt (Migo)

MIGO
Document
5000001328

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INVOICE Verification (MIRO)
5105609473

No if you want to check how much quantity of item utilized so far, go to

ME33Kenter contract -select Item Row- click on Release documentation (Ctrl+shift+F12)

You will get result as shown below

Note: If you utilize all target quantity in contract and ordered more than that system will prompt
you with warning message.

Value Contract (WK)

TCode ME31Kselect Agreement type Value Contract- fill all the information and proceed

Earlier this tab was not

compulsory now its compulsory
enter here 500000000

After this you will be in window as shown below initially it takes value from PIR you need to
change it by selecting row and hitting tab highlighted

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After changing you will get the values as shown below;

Save the contract you will get

Rest all the things in process of procurement are same.

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