Purchase Order

Definition
A purchase order is a formal request or instruction from a purchasing organization to a vendor or
a plant to supply or provide a certain quantity of goods or services at or by a certain point in time.

The purchase order can be used for a variety of procurement purposes. You can procure materials
for direct consumption or for stock. You can also procure services.

You can also use a purchase

order to procure a material that is
needed in one of your plants from
an internal source, i.e. from
another plant. Such transactions
involve longer-distance stock
transfers. The activities following
on from purchase orders (such as
the receipt of goods and
invoices) are logged, enabling you
to monitor the procurement
process
Item Category :
Definition: The item category determines whether the material defined in a purchase order item:
Requires a material number.
Requires an account assignment.
Is to be managed as a stock item.
Requires a goods receipt (GR) and/or an invoice receipt (IR).
The following item categories are defined in the standard system:

Standard: Items of the category Standard are goods that are to be procured externally. In this case, both
goods and invoice receipts are possible.
Consignment: Items of the category Consignment are items procured on a consignment basis. Account
assignments cannot be made for material ordered on consignment.
Consignment stocks are managed separately and are not valuated. Consignment stocks are discussed in
the Consignment section of the MM Inventory Management documentation.
Subcontracting: Order items of the category Subcontracting may represent finished assemblies ordered
from a subcontractor, for example. Any components the subcontractor requires from you to produce
such an assembly are entered as "material to be provided" items.
Stock Transfer: Stock transfer items occur in connection with stock transport ordering. Stock transport
orders are a mechanism for the transfer of stock from one plant to another (that is, transfers involving
transport over a longer distance). The stock transport order is one of the special order types in
Purchasing,
Third-Party: Third-party orders are orders placed with vendors as part of a triangular business deal,
instructing the latter to supply goods to or perform a service for a third party (for example, a drop-
shipment to one of your customers). This means that the goods recipient is in this case the customer.
"Third-party" can be specified in the item category field of a requisition or purchase order.
The third-party order is one of the special order types in Purchasing

Limit: Limit items occur in connection with blanket purchase orders (which hence may also be referred to
as "Pos with limits" or "limit orders"). Blanket Pos can be used to procure a variety of materials or
services up to a certain predefined maximum value (the value limit) from a vendor.
The nature of the materials or services in question is generally such that the cost of and administrative
effort involved in processing individual purchase orders is regarded as disproportionately high in
relation to their value (e.g. purchase of office supplies and minor services required during the course of
the year). Blanket Pos have the document type FO. Instead of a specific delivery date, you can specify a
validity period for the order. Goods receipts or the entry and acceptance of services performed are not
necessary in the case of a blanket PO and limit items.
The invoices are posted directly with reference to the purchase order, provided that the specified value
limit is not exceeded. The account assignment need only be specified at the time of invoice entry.
Creating a PO - With Master Record ( ME21N)
Number assignment: If your company uses external number assignment, then you must have a PO
number that falls within the permitted number range.
Enter Vendor: The vendor must have a vendor master record. You enter the number of the vendor master
record when you create a PO
Purchase Organization,
Purchasing Group,
Company Code,
Material number: If a material master record exists for the material, you need the number of the material
to be ordered.
Order quantity
Delivery date: You can either enter the desired delivery date or leave the field empty. If the field is empty,
the system determines the delivery date from the current date plus the planned delivery time for the
material
Price: You can either enter the net price yourself or have the system calculate it (by entering pricing
conditions).
Plant: You need the key of the plant for which the material or service is to be ordered.
Storage Location.
The default value for the net price is taken from the purchasing info record. If no info record is available
for the material from the vendor in question, it is taken from the last document.
If the price should deviate from the net price of the last document, select the item and choose Item--
Details
The default value for the net price is taken from the purchasing info record. If no info record is available
for the material from the vendor in question, it is taken from the last document.
If the price should deviate from the net price of the last document, select the item and choose Item–
Details

Enter the net price on the item detail screen. Press ENTER to branch to the item overview.
If you enter the vendor’s gross price per unit and then enter conditions for the item, the system will
automatically replace the price you entered with the net price.
You enter conditions or change the gross price by selecting the item and choosing Item--- Conditions.
Check the following where appropriate: – The item data (item detail screen)
– The texts for the item (Item -- Texts --Text overview)

– The document header data (header detail screen)

– The PO header texts (Header --Texts --Text overview)

Here text (Material PO text) copies from Material Master Record

Info record note from “Info record(me11)”
 Creating a PO - Without Master Record ( ME21N)

Number assignment: If your company uses external number assignment, then you must have a PO
number that falls within the permitted number range.
Enter Vendor: The vendor must have a vendor master record. You enter the number of the vendor master
record when you create a PO
Purchase Organization,
Purchasing Group,
Company Code,
– Account assignment
– Material: Leave the Material column blank. Enter a short description of the material in the Text field
and the material group in the Material group field
Order quantity:
Delivery date: You can either enter the desired delivery date or leave the field empty. If the field is
empty, the system determines the delivery date from the current date plus the planned delivery time for
the material

– Price: If you first enter the vendor’s gross price per unit and then conditions for the item (Item--
Conditions), the system will automatically replace the gross price you entered with the net price.
You can also enter the net price (the price after taking discounts and surcharges into account

– Price unit/order price unit

Plant: You need the key of the plant for which the material or service is to be ordered.
Storage Location.
Choose Item--Account assignments to enter additional account assignment data (for example, the
number of the G/L account).
You can save time and effort when creating or changing a purchase order by copying an already existing
one or adopting items from an existing requisition, RFQ, or contract

Enter PO document type, PO date, Purchase Organization, Purchasing Group.

Click on “Ref. to RFQ”
In the dialog box which now appears, enter the number of the reference document and the relevant item
number (if known). Press ENTER to display the item overview screen.
Select the items to be adopted.
If you wish to change the selected items before you adopt them, choose Edit--- Adopt + Details. Change
the individual items on the item detail screen.
If you wish to adopt the selected items without first changing them, choose Edit---Adopt.
The item overview for the newly created PO (with the items you adopted) appears

Note: in the case of “PO with reference to PR”. Enter “vendor code” and click on
“ ref to PR”
 Creating a Purchase Order With Zero Value
If you wish to monitor the delivery dates of a material which is not subject to value-based inventory
management (e.g. samples), you can create a zero-value purchase order for the material.

You create a zero-value PO in the same way as you create one that has a value. However, you additionally
set the Free of charge indicator in the item overview.

The system will then set the net price of the PO item to 0 and cancel the IR (invoice receipt) indicator on
the item overview screen. (The indicator is automatically set in the standard system.)
 Automatic Purchase Order Via Purchase Requisition (ME59).

Purchase requisition items that have been assigned a source of supply can be converted to
purchase orders with the function for automatic purchase order generation, provided that this is
defined in the material master and vendor master record.

Select Automatic Purchase Order in Purchasing screen of Material Master record (MM01)
Select Automatic Purchase Order in Purchasing data screen of Vendor Master record (XK01)
Create Source List (ME01)

Enter Material number and Plant

Enter validity of that vendor, vendor code, Purchasing Organization

Press enter and save

Create Info record (ME11)

Select Source determination in Purchase Requisition ( ME51n)
Enter Purchase Organization, Plant, Purchase Requisition number.
Execute (F8).
See the result
Purchase Order “ “ created.