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The Procurement Process Chapter 4 1 Magal and Word | Integrated Business Processes with ERP Systems | © 2011.

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Presentation on theme: "The Procurement Process Chapter 4 1 Magal and Word | Integrated Business Processes with ERP Systems | © 2011."— Presentation transcript:

1 The Procurement Process Chapter 4 1 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

2 Learning Objectives 1. Describe the major organizational levels associated with the procurement process. 2. Discuss the four basic categories of master data that are utilized during the procurement process. 3. Explain the key concepts associated with the procurement process 4. Identify the key steps in the procurement process and the data, documents, and information. 2 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

3 Learning Objectives (Continued) 5. Effectively use SAP ERP to execute the key steps in the procurement process 6. Utilize SAP ERP to extract meaningful information about the procurement process 3 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

4 Team up in groups - Collect all answers from last sessions Multiple Choice Questions - Select a group leader - Go through all questions / answers together - Back in 10 min Together we will go through the questions 4 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

5 A Basic Procurement Process Magal and Word | Integrated Business Processes with ERP Systems | © )Lageret / pakhuset opretter en inkøbsrekvisition 2)Indkøbsafdelingen opretter og sender indkøbsordre 3)Lageret modtager materialer 4)Regnskabsafdelingen modtager faktura 5)Regnskabsafdelingen sender betalingen

6 Outline 1. Organizational data 2. Master data 3. Key concepts 4. Process 5. Reporting 6 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

7 1. Organizational Data Client Company code (CC) Plant Storage location (S Loc) Purchasing organization (P Org) Purchasing group 7 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

8 Plant Many definitions or uses. A location That holds valuated stock (for distribution) Where production planning is carried out Where products and services are created That contains service or maintenance facilities Factory, warehouse, distribution center Can be assigned to one CC (company code) only A CC can have many plants 8 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

9 Storage Location A place, within a plant, where materials are stored Areas designated for different types of material (raw material, work-in-process, finished goods) More sophisticated divisions including storage bins, cabinets, trays A plant must have at least one storage location A storage location can belong to only one plant 9 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

10 GBI Storage Locations 10 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

11 Purchasing Organization Identify and select vendors Negotiate general conditions of purchase and contracts for one or more plants or companies. Determine pricing conditions Typically three models for Purchasing Organization Enterprise-Level Company-Level Plant-Level 11 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

12 Enterprise-Level Purchasing Organization Also known as cross-company code model One Purchasing Organization assigned to all CC in a client Purchasing for all plants across all CC Highly centralized – corporate Purchasing Org 12 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

13 Enterprise-Level Purchasing Organization 13 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

14 Company-Level Purchasing Organization Also known as cross-plant model Different Purchasing Organizations are assigned to each CC Purchasing for all plants in one or more CC 14 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

15 Company-Level Purchasing Organization 15 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

16 Plant-Level Purchasing Organization Also known as plant-specific model Each plant has its own Purchasing Organization Highly decentralized 16 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

17 Plant-Level Purchasing Organization 17 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

18 Reference Purchasing Organization One centralized Purchase Org for high-level decisions across the enterprise Multiple CC-specific and plant-specific Purchase Org Disadvantages: No advantage of local practices Lack of quick reactions to changes in local conditions 18 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

19 Purchasing Group A buyer or group of buyers responsible for certain materials or groups of materials Can be internal to the company or external Decide to purchase land, but use a realtor (external purchasing group) to execute the purchase Not assigned to or related to purchasing org 19 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

20 2. Master Data Material Master Vendor Master Purchasing info record Conditions 20 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

21 Material Master Data needed to execute transactions related to materials (along with org data) Data are grouped by different user areas (views) Data are specific to (defined for) for different organizational levels 21 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

22 Material Master – Views Basic data Purchasing Accounting Forecasting Sales Plant / Storage Work Scheduling MRP Classification Warehouse Management 22 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

23 Material Master – Views Basic data Description, unit of measure, weight, material group Purchasing Purchasing group, GR processing time, delivery (under / over) tolerances Accounting Currency, valuation class (link to G/L), price control (moving price, standard price, future price) Plant / Storage Storage requirements (hazard, temperature, etc.) Shelf life Weight, volume 23 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

24 Material Master - Views Views for other processes Forecasting (Material Planning process) Sales (Fulfillment process) Work Scheduling (Production process) MRP (Production process) Classification (PLM process) Warehouse Management (WM process) 24 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

25 Material Master - Views Different material types have different required views Examples: Raw material: no sales view Finished Goods: no purchasing view Trading goods: no production related views 25 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

26 Material Master – Org Levels Defines the level at which the master data is maintained Can have different data for different combinations of Org data Purchasing: Plant, storage location Sales: Sales Area (Sales Org, Distribution Channel) Warehouse: Warehouse #, storage type Example: SHRT MI00+ TG00 SHRT SD00+ TG00 SHRT US00 + Wholesale channel SHRT US00 + Internet channel 26 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

27 Demo 4-1: Review Material Master Review some of the data included in a material master. View demo 4-1 Magal and Word | Integrated Business Processes with ERP Systems | ©

28 Vendor Master Data needed to do business with vendors Data needed to execute transactions related to vendors (along with org data) Data are specific to (defined for) different organizational levels. The three segments are: Client level data (General) Company code level data (Accounting) Purchasing organization level data (Purchasing) 28 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

29 Vendor Master Segments 29 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

30 Data in the Vendor Master 30 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

31 Vendor – General Data Client-level data Valid across all CC in a client Examples Name, Address Communication (phone, fax) Search term 31 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

32 Vendor – Accounting Data Company code specific data Valid for the entire company code across purchasing areas Examples Account information Bank information Reconciliation account Payment terms and methods Communication (dunning) 32 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

33 Vendor – Purchasing Data Separate for each Purchasing Organization Applies to the specified Purchase Org Examples Partner functions (vendor, invoicing party, payment recipient) InCoTerms: defines responsibilities and costs of shipment Freight, insurance, customs clearance, locations 33 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

34 Demo 4-2: Review Vendor Master Review some of the data included in a vendor master. View demo 4-1 Magal and Word | Integrated Business Processes with ERP Systems | ©

35 Purchasing Info Record Relates vendors and materials. One info record per combination of vendor and material (or material group) General data Conditions: pricing, discounts, free goods (current and future) Vendor data Texts (notes) 35 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

36 Purchasing Info Record Magal and Word | Integrated Business Processes with ERP Systems | ©

37 Purchasing Info Record Magal and Word | Integrated Business Processes with ERP Systems | ©

38 Conditions Pricing Conditions Gross price Discounts and surcharges Freight / shipping Obtained from Purchasing info records Contracts and agreements Other sources Based on the overall agreements and contracts in place with vendors 38 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

39 Demo 4-3: Review Purchasing Info Records Magal and Word | Integrated Business Processes with ERP Systems | © Review data in a purchasing info record. View demo 4-3

40 3. Key Concepts Item categories Account determination Stock type/status Goods movement 40 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

41 Item Categories Defines the process used to procure the item Categories Standard Subcontracting Components provided; finished product received Consignment Liability only when withdrawn from stock Service Stock transfer Third party order Ship to third party; bill to us (drop shipment) 41 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

42 Demo 4-4: Review Item Categories 42 Magal and Word | Integrated Business Processes with ERP Systems | © 2011 Review various item categories used in the purchasing process. View demo 4-4

43 Account Determination Which GL account to assign to PO? Defined in material master (valuation class) Account assignment categories Used when purchasing material without material master Assets, Production Order, Cost Center, Sales, Order, Project Automatic GL account determination based on category 43 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

44 Purchase for Stock vs. Consumption Magal and Word | Integrated Business Processes with ERP Systems | ©

45 Stock Types / Status Based on usability of material Unrestricted use In quality inspection Blocked stock (damaged, unusable; wrong delivery) Stock in transit 45 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

46 Goods Movement A transaction that causes a change in stock (value or status) Categories of Goods Movement Specific Movement types Materials from a vendor Shipping materials to a customer 4 common goods movement: Goods receipt Goods issue Stock transfer Transfer position 46 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

47 Structure of a Material Document Magal and Word | Integrated Business Processes with ERP Systems | ©

48 Demo 4-5: Review a Material Document Magal and Word | Integrated Business Processes with ERP Systems | © Review data included in a material document. View demo 4-5

49 Goods Movements Goods Receipt From vendor or production process Increase in quantity and value of stock Goods Issue To sales order or internal consumption Decrease in warehouse stock Stock Transfer Physical movement of material between storage locations Sloc to Sloc Plant to Plant CC to CC 49 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

50 Goods Movements Transfer Posting Results in a change in material status In-quality inspection/ blocked/ unrestricted use One material type to another May or may not include a change in location (Sloc, plant) 50 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

51 Demo 4-6: Review Goods Movements and Movement Types Magal and Word | Integrated Business Processes with ERP Systems | © Review various goods movements and movement types View demo 4-6

52 A Detailed Procurement Process 52 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

53 Process Steps Trigger Data Task details Outcomes 53 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

54 GBI Story Inventory of t-shirts (SHRT1000) is low (<=50) in the Miami plant Therefore it is necessary to procure more t-shirts Spy Gear is the only supplier of t-shirts Quantity purchased is 500 Purchase price is $15 per t-shirt Magal and Word | Integrated Business Processes with ERP Systems | ©

55 Elements of the Purchase Requisition Step 55 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

56 Purchase Requisition Trigger Other processes Manually Data User input: Dates, materials, quantities Master data: Material master, Vendor, Info record Organizational data: Client, CC, P Group Task details: none Output Document: Purchase requisition Subsequent steps Purchase Order RFQ (request for quotations) 56 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

57 Data in a Purchase Requisition 57 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

58 Converting a Purchase Requisition to a Purchase Order 58 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

59 GBI Scenario Material planning process has determined Re-order point = 50 Order quantity = 500 Miami plant employee reviews inventory report and determines that it is necessary to reorder Requisition: 500 SHRT1000 to be delivered at the Miami plant by a specified date Magal and Word | Integrated Business Processes with ERP Systems | ©

60 Demo 4-7: Create a Purchase Requisition 60 Magal and Word | Integrated Business Processes with ERP Systems | © 2011 Create a purchase requisition for stock material. View demo 4-1

61 Elements of the Purchase Order Step 61 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

62 Purchase Order Creation Manually or automatically With or without reference to other documents Data Documents: Purchase requisition, Purchase order, RFQ, Quotation Master data: Material (characteristics) Vendor (terms) Info record (pricing) Conditions (pricing) 62 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

63 Data in a Purchase Order 63 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

64 Purchase Order Tasks Data automatically included from input sources Source determination using info records, agreements and contracts, and source lists Outcomes Purchase order Purchase requisition history – PO added Communicate with vendor (external procurement) using messages: fax, EDI, print Plant (internal procurement) using transfer orders 64 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

65 Purchase Order Structure Header Document number, dates Vendor, currency, terms PO total Line items Material number, description Quantity, price, item total Delivery date 65 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

66 The Structure of a Purchase Order 66 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

67 Communicating with vendors Magal and Word | Integrated Business Processes with ERP Systems | ©

68 GBI Scenario Create purchase order Material: SHRT1000 Quantity: 500 Vendor: Spy Gear (from source list or manual entry) Receiving plant: Miami Reference document: purchase requisition Price: $15 each (from info record) Total PO value: $7500 Magal and Word | Integrated Business Processes with ERP Systems | ©

69 Demo 4-8: Convert Purchase Requisition to Purchase Order Magal and Word | Integrated Business Processes with ERP Systems | © Convert a previously created purchase requisition into a purchase order Review data in the purchase requisition View demo 4-8

70 70 Magal and Word | Integrated Business Processes with ERP Systems | © 2011 Elements of the Goods Receipt Step

71 Goods Receipt Data Documents: PO (purchase order), Delivery document (packing list) Master data Task Verify materials receipt Create GR document Outcomes Material documents Header: Document number, date, reference Details (items): Material, quantity, location, movement type Financial Accounting documents Header: Document number, date, reference, currency Details (Items): GL accounts, description, amount 71 Magal and Word | Integrated Business Processes with ERP Systems | © 2011

72 Goods Receipt (continues) Outcomes Notifications Material master: stock and value GL (general ledger) accounts (Stock/Consumption, GR/IR) PO history – Material document added Quality management Quality inspection lot Warehouse management Magal and Word | Integrated Business Processes with ERP Systems | ©

73 Data In The Goods Receipt Step Magal and Word | Integrated Business Processes with ERP Systems | ©

74 Financial Impact of Goods Receipt Magal and Word | Integrated Business Processes with ERP Systems | © GR/IR = Goods receipt / Invoice receipt

75 Material and Accounting Documents from a Goods Receipt Magal and Word | Integrated Business Processes with ERP Systems | ©

76 Demo 4-9: Receive goods against a Purchase Order Magal and Word | Integrated Business Processes with ERP Systems | © Record the receipt of materials for the purchase order previously created. Review data in the associated purchase requisition. Review data in the associated purchase order. View demo 4-9

77 Elements of the Invoice Verification Step Magal and Word | Integrated Business Processes with ERP Systems | ©

78 Invoice Verification Data Vendor invoice Purchase order Material document Tasks Three-way match (purchase order – goods receipt/delivery document – invoice) To ensure that quantities and price are consistent in all 3 documents Outcomes Financial Accounting documents Magal and Word | Integrated Business Processes with ERP Systems | ©

79 Demo 4-10: Receive and Verify an Invoice Magal and Word | Integrated Business Processes with ERP Systems | © Verify and record an invoice received from a vendor. Review data in the associated purchase order View demo 4-10

80 Elements of the Payment Step Magal and Word | Integrated Business Processes with ERP Systems | ©

81 Payment Processing Creation: manually or via automatic payment program Data Three-way match (or other process) Payment method, account, items to pay, Tasks Calculate payment amount (discounts) Post payment document (accounting document) Magal and Word | Integrated Business Processes with ERP Systems | ©

82 Payment Processing Outcomes Financial Accounting Documents Payments (checks, EFT, notifications) Updates GL accounts Material master :Moving average price (if using moving price vs. standard price) Magal and Word | Integrated Business Processes with ERP Systems | ©

83 Data needed for Vendor Payment Magal and Word | Integrated Business Processes with ERP Systems | ©

84 Financial Impact of Vendor Payment Magal and Word | Integrated Business Processes with ERP Systems | ©

85 Demo 4-11 Make payment to Vendor Magal and Word | Integrated Business Processes with ERP Systems | © Record payment made to a vendor for previously recorded invoices. View demo 4-11

86 Integration With Other Processes Magal and Word | Integrated Business Processes with ERP Systems | ©

87 Reporting Source of data Instance level reporting (status) Process level reporting Lists and reports Purchasing Information System Magal and Word | Integrated Business Processes with ERP Systems | ©

88 Reporting - Sources Organizational data Master data Transaction data (documents) Purchasing documents Material documents Accounting documents Invoice documents Magal and Word | Integrated Business Processes with ERP Systems | ©

89 Reporting - Instance Status of a Requisition, Purchase Order Magal and Word | Integrated Business Processes with ERP Systems | ©

90 List of Invoices Magal and Word | Integrated Business Processes with ERP Systems | ©

91 Work List – List of Requisitions Magal and Word | Integrated Business Processes with ERP Systems | ©

92 Demo 4-12: Display a List Report Magal and Word | Integrated Business Processes with ERP Systems | © Retrieve and display a list of invoices (online list) Retrieve and display a list of open purchase requisitions (work list) View demo 4-12

93 Reporting - Standard Process level reporting Standard reports / List displays Logistics Information System Magal and Word | Integrated Business Processes with ERP Systems | ©

94 Reporting – Logistics Information System Components Purchasing Information System Sales Information System Quality Management Information System Inventory Control Transportation Information System Shop Floor Information System Plant Maintenance Information System Magal and Word | Integrated Business Processes with ERP Systems | ©

95 Reporting – Logistics Information System Information Structures Special tables of statistics from various modules that is constantly updated Selection criteria (types of information) Key figures: variables of interest Quantitative values on measurable facts Numbers (of orders, deliveries) Quantities (of material) Cost, delivery time Characteristics: used to organize key figures Vendors, material, organizational levels Timeframe: day, week, month, etc. Magal and Word | Integrated Business Processes with ERP Systems | ©

96 Standard Analysis Magal and Word | Integrated Business Processes with ERP Systems | ©

97 Demo 4-13: Display a report using the Purchasing Information System Magal and Word | Integrated Business Processes with ERP Systems | © Generate a standard report using the purchasing information system for the US00 Purchasing Organization. Drill down to several levels of information in the report. View demo 4-13

98 Flexible Analysis Magal and Word | Integrated Business Processes with ERP Systems | ©


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