Chapter 22 Procurement Cycle and Documents

• Procurement is a component of the Materials Management module that supports the purchase of materials and / or services by an organization from sources outside the organization. • In keeping with the system’s Document Principle, the steps in the Procurement Cycle are represented by various documents, which are produced in both the Materials Management and Financial Accounting Modules. • Chapter Objectives – Provide an overview of how the system supports an integrated Procurement Cycle. – Provide a description of the purpose and functionality of the documents created in the system in support of the Procurement Cycle.

4.6fi_22.1

Overview of the Procurement Cycle

Procurement Cycle
A/P X Cash X

Vendor Paymen t (FI) Invoice Verificatio GR/IR n X (MM)

Purchase Requisitio n (MM) Purchase Order (MM)

A/P X

Goods Receipt (MM)

Inventory X

GR/IR X

4.6fi_22.2

Overview of the Procurement Cycle

Procurement & Accounts Payable
Material Management PO GR Invoice
Display Vendor Process Account Balances Process Outgoing Down Payment Payment Create, Display and and change Credit Memo Display / Change Vendor Master Vendor Line Items Records Create Vendor Invoices Manually

FI Accounts Payable
4.6fi_22.3 Overview of the Procurement Cycle

Main Procurement Cycle Documents
• Purchase Requisition • Request for Quotation • Quotation • Outline Agreements
• •

Contract Scheduling Agreement

• Purchase Order • Goods Receipt • Invoice Verification • Vendor Payment

4.6fi_22.4

Overview of the Procurement Cycle

Documents in Materials Management
Purchasing Save Order Document Goods Receipt Post Goods Receipt GR Document Delivery Date Materials Quantity Values Account Postings Invoice Verification Post Invoice IR Document Vendor Quantity Values Account Postings

Order Document Vendor Delivery Date Conditions Materials Quantities Prices

Materials Management
4.6fi_22.5

Accounting
Overview of the Procurement Cycle

Purchase Requisition
Internal Document Identifies demand for a product

Purchase Requisition

Authorizes Purchasing Department to procure
4.6fi_22.6

Can be created automatically or manually
Overview of the Procurement Cycle

Purchase Requisitions
MRP Purchase Requisition Manual Creation

Identify Vendor

Process Requisition

Request for Quotation

Purchase Order

4.6fi_22.7

Overview of the Procurement Cycle

Purchase Order

Legal contract between Buyer and Vendor

4.6fi_22.8

Overview of the Procurement Cycle

Purchase Order (PO)
Reference RFQ Contract PO Purchase Requisition Another PO

Create

Vendor: 1000

4.6fi_22.9

Overview of the Procurement Cycle

Request For Quotations (RFQ)
Purchase Requisition Reference RFQ Outline Agreement Create Vendor: 1000 Vendor: 2000 Vendor: 3000

RFQ

4.6fi_22.10

Overview of the Procurement Cycle

Quotations
Vendor 1000
Quotation for RFQ: 1 Item: 10 Gross Price: $400/t Discount: $50

Comparison
Vendor A Vendor B Vendor C Average $350/t $480/t $520/t $450/t


 

Info. Record Vendor 1000
Purchase Order Mat Qty Price Steel 2t $350/t

Vendor 2000
Quotation for RFQ: 2 Item: 10 Gross Price: $400/t Surcharge: 20%

Vendor B, C
Rejection Letter

Vendor 3000
Quotation for RFQ: 3 Item: 10 Gross Price: $500/t Fixed Costs: $20

4.6fi_22.11

Overview of the Procurement Cycle

Outline Agreements
Contract $ Contract Qty

Scheduling Agreement

Total:

Total:

Release Order

Delivery Schedule

4.6fi_22.12

Overview of the Procurement Cycle

Contracts
Create Requisition

Contract
Request for Quotation

Reference Contract Release Order
1 7 14 8 15 22 29 2 9 16 23 30 March 1997 3 10 17 24 31 4 11 18 25 5 12 19 26 6 13 20 27

Quantity

21 28

4.6fi_22.13

Overview of the Procurement Cycle

Scheduling Agreements
Requisition Reference RFQ Reference Scheduling Agreement

History

Vendor One-Time Vendor

Vendor Scheduling Agreement

Delivery Schedule
1/30 3/30 5/30

4.6fi_22.14

Overview of the Procurement Cycle

Goods Receipt (GR) Document

Vendor

Buyer Goods Receipt

4.6fi_22.15

Overview of the Procurement Cycle

Posting a Goods Receipt
Stock GR/IR Clearing

Inward movement on goods receipt

4.6fi_22.16

Overview of the Procurement Cycle

Invoice Verification
Materials Management PO Open Items Goods Receipt Invoice Invoice Verification Financial Accounting

4.6fi_22.17

Overview of the Procurement Cycle

Posting the Invoice
Stock GR/IR Clearing Vendor

Goods Receipt Invoice Receipt (Invoice Verification)

4.6fi_22.18

Overview of the Procurement Cycle

Payment in the Procurement Cycle
MM Purchase Order

MM

Goods Receipt

MM

Invoice Posting

FI
4.6fi_22.19

Payment
Overview of the Procurement Cycle

Payment Processing
Vendor A Invoice Vendor A InInvoice Vendor B InInvoice Vendor C InInvoice

Manual Payment

Payment Program

OR Check
4.6fi_22.20

Bank Transfer
Overview of the Procurement Cycle

Payment Processing Results
PAYMENT (Manual or via Payment Program)

Create a Payment Form

Create a Vendor Payment Document Post to Vendor Account Post to G/L Accounts

Clear the Vendor Open Item

4.6fi_22.21

Overview of the Procurement Cycle

Account Assignment Category
Stock Material with Material master record ACCOUNT ASSIGNMENT Receive into Stock Automatic Account Assignment from Material Master Data Update @ GR Time to STOCK ACCOUNT
4.6fi_22.22

Consumable Material (Non-Stock) ACCOUNT ASSIGNMENT

??

??

Enter Account Assignment Category Manual Account Assignment - User Must Enter Account Data Update @ GR Time to CONSUMPTION or ASSET ACCOUNT
Overview of the Procurement Cycle

Account Assignment Categories
Create Order Document A C E F P Q U X Asset Sales Order Customer Requirements Production Order Project Project - Make to Order Unknown All Auxiliary Account Assignment

K Cost Center

4.6fi_22.23

Overview of the Procurement Cycle

Procurement Cycle
A/P X Cash X

Purchase Requisition (MM) Purchase Order (MM)

Vendor Payment (FI)

(FI)
A/P X

Invoice Verification (MM) GR/IR
X

Goods Receipt (MM)

(FI)
Inventory X GR/IR X

4.6fi_22.24

Overview of the Procurement Cycle

Materials Management Documents Chapter Summary
• Key Terms – Procurement Cycle – Materials Management Documents – Order Document – Purchase Requisition – Request for Quotation – Purchase Order – Quotations – Outline Agreement

4.6fi_22.25

Overview of the Procurement Cycle

Materials Management Documents Chapter Summary
• Key Terms – Contract – Scheduling Agreement – Goods Movement – Goods Receipt – Invoice Receipt – Invoice Verification – Payment Program – Account Assignment Category

4.6fi_22.26

Overview of the Procurement Cycle

Sign up to vote on this title
UsefulNot useful