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

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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

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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

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A Basic Procurement Process Magal and Word | Integrated Business Processes with ERP Systems | 2011 4

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Outline Organizational data Master data Key concepts Process Reporting 5 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Organizational Data Client Company code (CC) Plant Storage location (S Loc) Purchasing organization (P Org) Purchasing group 6 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 only A CC can have many plants 7 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 8 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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GBI Storage Locations 9 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 10 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 11 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Enterprise-Level Purchasing Organization 12 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 13 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Company-Level Purchasing Organization 14 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Plant-Level Purchasing Organization Also known as plant-specific model Each plant has its own Purchasing Organization Highly decentralized 15 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Plant-Level Purchasing Organization 16 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Reference Purchasing Organization One centralized Purchase Org for high-level decisions across the enterprise Multiple CC-specific and plant-specific Purchase Org 17 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 18 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Master Data Material Master Vendor Master Purchasing info record Conditions 19 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 20 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Material Master Views Basic data Purchasing Accounting Forecasting Sales Plant / Storage Work Scheduling MRP Classification Warehouse Management 21 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 22 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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) 23 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 24 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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: SHRT1000 + MI00+ TG00 SHRT1000 + SD00+ TG00 SHRT1000 + US00 + Wholesale channel SHRT1000 + US00 + Internet channel 25 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Demo 4-1: Review Material Master Review some of the data included in a material master. Magal and Word | Integrated Business Processes with ERP Systems | 2011 26

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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) 27 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Vendor Master Segments 28 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Data in the Vendor Master 29 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Vendor General Data Client-level data Valid across all CC in a client Examples Name, Address Communication (phone, fax) Search term 30 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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) 31 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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 32 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Demo 4-2: Review Vendor Master Review some of the data included in a vendor master. Magal and Word | Integrated Business Processes with ERP Systems | 2011 33

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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) 34 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Purchasing Info Record Magal and Word | Integrated Business Processes with ERP Systems | 2011 35

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Purchasing Info Record Magal and Word | Integrated Business Processes with ERP Systems | 2011 36

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Conditions Pricing Conditions Gross price Discounts and surcharges Freight / shipping Obtained from Purchasing info records Contracts and agreements Other sources 37 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Demo 4-3: Review Purchasing Info Records Magal and Word | Integrated Business Processes with ERP Systems | 2011 38 Review data in a purchasing info record.

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Key Concepts Item categories Account determination Stock type/status Goods movement 39 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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) 40 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Demo 4-4: Review Item Categories 41 Magal and Word | Integrated Business Processes with ERP Systems | 2011 Review various item categories used in the purchasing process.

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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 42 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Purchase for Stock vs. Consumption Magal and Word | Integrated Business Processes with ERP Systems | 2011 43

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Stock Types / Status Based on usability of material Unrestricted use In quality inspection Blocked stock (damaged, unusable; wrong delivery) Stock in transit 44 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Goods Movement A transaction that causes a change in stock (value or status) Categories of Goods Movement Specific Movement types 45 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Structure of a Material Document Magal and Word | Integrated Business Processes with ERP Systems | 2011 46

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Demo 4-5: Review a Material Document Magal and Word | Integrated Business Processes with ERP Systems | 2011 47 Review data included in a material document.

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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 48 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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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) 49 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Demo 4-6: Review Goods Movements and Movement Types Magal and Word | Integrated Business Processes with ERP Systems | 2011 50 Review various goods movements and movement types

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A Detailed Procurement Process 51 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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Process Steps Trigger Data Task details Outcomes 52 Magal and Word | Integrated Business Processes with ERP Systems | 2011

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GBI Story Inventory of t-shirts (SHRT1000) is low (