Enterprise Wide Information Systems The Procurement Process

1. Enterprise Wide Information SystemsThe Procurement Process

2. Objectives Rather than selling, as you studied in the Customer Order Management process, you will now be focusing on the purchasing process. You will be able to: • Describe the basic business process of procuring stock materials in an ERP System. • Discuss the integration points in procurement to Financial Accounting and Inventory Management. • Execute the procurement process in the SAP R/3 System. • Discuss the reporting and analysis tools used by R/3 in the procurement cycle.

3. Topics • Organizational Elements and Master Data • Business Process for Procurement • Reporting and Analysis

4. Procurement The primary SAP R/3 application modules that support the Procurement process are: • Materials Management • Purchasing • Goods Receipts • Invoice Verification • Production Planning • Purchase Requirements • Financial Accounting • Payment Processing • Materials Valuation

5. Organizational Elements • The SAP R/3 Procurement business process uses the following organizational elements:

6. Master Data The following master data is used in the Procurement cycle: • Material master • Vendor master

7. Material Master Primary Views • Purchasing • Sales • Work Scheduling • Quality Management • Forecasting • Classification • Basic Data • Material Resource Planning • Stocks in Inventory • Accounting • Storage • Warehouse Management

8. Vendor Master • The Vendor Master includes all data necessary for processing business transactions and corresponding with vendors. • Information is shared between the accounting and purchasing departments. • All data is grouped into three categories: • General data • Company code data • Purchasing data

9. Topics • Organizational and Master Data • Business Process for Procurement • Reporting and Analysis

10. Procurement Cycle • The procurement cycle may consist of eight processes:

11. Business Process Flow for Procurement • The main documents and transactions in the Procurement process are: • Note: Payments to vendors are usually made at specified times (e.g. at the end of the month). • Payment amounts are determined according to the ‘open’ invoices posted on the system.

12. Purchase Requisition Processing

13. Purchase Orders • A purchase order is a formal request to a vendor to provide certain materials or services under specific conditions (quantity, price, delivery date, etc.)

14. Purchase Order Processing

15. Goods Receipt • When goods are received from a purchase order, the item data is copied from the purchase order into the goods receipt document.

16. Goods Receipt for Stock Material • Entering the goods receipt increases the inventory level of a material that is procured for stock. • Inventory Management (MM module) controls and records all goods movement, form purchase order receipt through the plant, to consumption

17. Accounting document G/L accounts: Consumption account GR/IR account Stock quantity Consumption statistics Material document Point of consumption Cost center Order Goods Receipt Posting Goods receipt slip Transfer Order Purchasing data: Order item, Order history Results of a Goods Receipt Posting • Transaction documents are created both for materials management and finance.

18. Invoice Processing • This last step in the procurement process includes invoice verification and updating accounts payable in the FI module. • Payment will then be made later based upon the ‘open’ invoices posted on the system

19. Invoice Verification Environment • Invoice verification accesses data from purchasing, inventory management, material master, and vendor master files.

20. Vendor Payment • Accounts payable reads the invoice file and pays all posted invoices due. (Payment runs can be automated to occur at specific times.)

21. MM PP FI FI Purchase Order Goods Receipt Invoice Verification Purchase Order Invoice Procurement Integration

22. Topics • Organizational and Master Data • Business Process for Procurement • Reporting and Analysis

23. Reporting and Analysis • Standard Reporting provides List Displays (pre-defined programs) by: • Vendor • Material • Account assignment • Material group • Purchase order number • Tracking number • General Analysis • Order Value Analysis • Inventory Transaction Analyses

24. Logistics Information System (LIS) • The Logistics Information System (LIS) contains several information systems such as: • Purchasing Information System • Inventory Controlling • Sales Information System • Shop Floor Information System • LIS extracts its data from the operative applications; it offers many different views on this information.

25. Logistics Information System (LIS) • The LIS exists for the entire logistics system in R/3 • The LIS contains several information systems such as: • Sales Information System • Purchasing Information System • The LIS extracts data from the operative applications; offering it in many different views, the depth of which is determined by the user. • Inventory Controlling • Shop Floor Info System Logistics Information Systems Logistics Information Library Sales Information System Purchasing Information System Inventory Controlling Shop Floor Information System Maintenance Information System Quality Mgmt Information System R/3 Logistics Processing Systems Sales and Distribution (SD) Materials Management (MM) Production Planning (PP) Plant Maintenance (PM) Quality Management (QM)

26. In Summary • The basic procurement process includes: • Purchase requisition • Purchase order • Procurement master data includes the vendor and material master files. • At various times during the Procurement process, integration occurs between the PP, MM and FI modules. • The two reporting tools used in the procurement environment are: • Standard Reporting • List Displays General Analysis  Inventory Analysis • Logistics Information System • Purchasing Information System  Inventory Controlling System • Goods receipt • Invoice processing