Enterprise Wide Information Systems The Procurement Process Instructor

Enterprise Wide Information Systems The Procurement Process Instructor: Richard W. Vawter University of Southern California

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: n Describe the basic business process of procuring stock materials in an ERP System. n Discuss the integration points in procurement to Financial Accounting and Inventory Management. n Execute the procurement process in the SAP R/3 System. n Discuss the reporting and analysis tools used by R/3 in the procurement cycle. University of Southern California

Topics l Organizational Elements and Master Data l Business Process for Procurement l Reporting and Analysis University of Southern California

Procurement The primary SAP R/3 application modules that support the Procurement process are: n Materials Management Purchasing Goods Receipts Invoice Verification n Production Planning Purchase Requirements n Financial Accounting Payment Processing Materials Valuation University of Southern California

Organizational Elements l The SAP R/3 Procurement business process uses the following organizational elements: University of Southern California

Master Data The following master data is used in the Procurement cycle: n Material master n Vendor master University of Southern California

Material Master Primary Views l Basic Data l Purchasing l Material Resource Planning l Sales l Stocks in Inventory l Work Scheduling l Accounting l Quality Management l Storage l Forecasting l Warehouse Management l Classification University of Southern California

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

Topics l Organizational and Master Data l Business Process for Procurement l Reporting and Analysis University of Southern California

Procurement Cycle l The procurement cycle may consist of eight processes: University of Southern California

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

Purchase Requisition Processing University of Southern California

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

Purchase Order Processing University of Southern California

Goods Receipt l When goods are received from a purchase order, the item data is copied from the purchase order into the goods receipt document. University of Southern California

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

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

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

Invoice Verification Environment l Invoice verification accesses data from purchasing, inventory management, material master, and vendor master files. University of Southern California

Vendor Payment l Accounts payable reads the invoice file and pays all posted invoices due. (Payment runs can be automated to occur at specific times. ) University of Southern California

Procurement Integration MM PP Purchase Order FI FI Purchase Order Goods Receipt Invoice Verification Invoice University of Southern California

Topics l Organizational and Master Data l Business Process for Procurement l Reporting and Analysis University of Southern California

Reporting and Analysis l Standard Reporting provides List Displays (pre-defined programs) by: n Vendor n Material n Account assignment n Material group n Purchase order number n Tracking number l General Analysis l Order Value Analysis l Inventory Transaction Analyses University of Southern California

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

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

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