Materials and Suppliers – Strategic Procurement

Richard Byrom Oracle Applications Consultant Enterprise Resource Planning Seminar – 24th May 2002


To illustrate how ERP systems add value to the procurement process

Procurement Process
Requisitions Negotiations & Awards Purchase Orders

Catalog Content Management




Analysis Supplier Management Supplier Performance


Procurement Process
Requisitions Purchase Orders




Without ERP Systems in Procurement

• • • • •

Disparate and fragmented systems do not talk to each other Information is not appropriately shared between applications Too much paper! Risk of error is high Transactions costs are inevitably increased

Procurement Process Failure
Requisitions Purchase Orders




Benefits of ERP systems in Procurement

Create, edit and view purchasing documentation on-line in one application (no re-entry of document information i.e information flow is ensured across applications) Review the current status and action history of all purchasing documentation Route purchasing documentation according to approval hierarchies Enables accurate and automated accounting for all transactions On line approvals – less paper Reduced total transaction costs

• • • • •

Purchase Requisitions

Why Purchase Requisitions?
• • •
Purchase requisitions allow you to decentralise your purchasing department by having requesters Purchase requisitions allow you to source your requisition with the best suppliers and at the lowest cost Purchase requisitions ensure that the appropriate management approval is given before purchase orders are created.

Where Purchase Requisitions Fit




Order Mgmt

Import/reschedule requisitions

Internal sales order

Order entry


Supplier Requisition pool

Manually create

Approval Requisition

Business Needs Associated with Purchase Requisitions
• • • • •
Automate the procurement process Monitor and control spending amounts by approval authorizations Simplify the interaction with suppliers Free buyers from daily transactions to focus on negotiation management and supplier analysis Reduce administrative costs and inefficiencies

Who Acts on Purchase Requisitions?
• • • • •
Employee Buyer or buyer-planner Approvers Suppliers Purchasing staff

Purchase Orders

Why Create Purchase Orders?
• • • • •
Supplier is selected to satisfy demand for goods or services Summarize all demand for a given item or category Supplier terms and conditions established Contract with a supplier: external or internal Business need for goods or services is formalized

Where Purchase Orders Come From
Oracle MRP Oracle Inventory Oracle Oracle Oracle Order Other systems WIP WIP Mgmt Demand Automatically imported

Manually created Requisitions Requester

Create purchase orders

Manually Create Purchase Orders Using Procurement Solution
Procurement Solution enables you to: • Create purchase orders easily • Create purchase orders from: – Requisitions – Quotations – Other purchase orders • Create one time and repeated purchase orders • Flexible approval and security controls

Purchase Invoices

Entering Purchase Order Matched Invoices : Overview
Receive invoice Enter invoice Match invoices to PO or receipt

Approve invoice

View invoice

Account for invoice

Pay invoice File invoice

Why Enter Purchase Order Matched Invoices?
• • •
Match Payables invoices to purchase orders to ensure that you pay only for the goods that you have ordered. Match to purchase order receipts to ensure that you pay only for goods that you have received. Payables automatically creates invoice distributions based on the purchase order distributions.

You Can Set Up Controls That Require You To Do The Following:
• • •
Purchase order match each invoice Match the invoice to either a purchase order or receipt Match within amount or quantity tolerances

Accounting Entries should be created at each stage of the process
• • • • •
Record items into inventory or expenses Appropriate valuation of stock should take place Physical and Monetary Variances between requisition and order should be recognised Physical and Monetary Variances between order and invoice should be recognised Account for invoice and payment into creditors


ERP is the best solution for your organisations procurement problems