Procurement Cycle: 2. Source of Supply Determination

In the previous posts I have written about procurement cycle and the first step of it (the requirement determination). In that step, user’s requirement is recorded as a Purchase Requisition (PR) document in SAP ERP. This PR needs to be processed by the buyer into a Purchase Order (PO) in the case of external procurement, or a Stock Transport Order (STO) in the case of stock transfer between plants. In this post I will explain more about general process of source of supply determination for external procurement PR.
PR item with source of supply
In the PR, user can propose source of supply of his requirement. The proposal can be an outline agreement or an info record. If the buyer agrees with the proposal, he can directly create a PO from that PR referring to the source of supply proposed. If he doesn’t agree with the user’s proposal, the buyer can find other source of supply for that PR item by himself. It can be an existing outline agreement or info record. Those can be done with ME57 t-code (Assign and Process Purchase Requisition).
Outline agreement is a longer-term arrangement between a company and a vendor concerning the supply of materials or the performance of services over a certain time frame (validity period) on the basis of predefined terms and conditions (such as unit price, delivery terms, terms of payment, etc).
An example of processing PR referring to an outline agreement:

Procurement Cycle: 1. Requirement Determination (Purchase-Requisition)

In the previous post I have explained about SAP basic procurement process which consists of 8 steps of procurement cycle. In this post I will explain in details about the 1st step: The Determination of Requirement.

Introduction
The determination of requirement in SAP procurement process is about Purchase Requisition (PR) creation. Purchase Requisition (PR) is an internal purchasing document that is used to give notification to responsible department about the requirement of material/service. In SAP ERP, the creator of the PR can keep track of his requirement by monitoring the status of the PR, whether it has been processed to be an Purchase Order (PO) or not .

A PR must contain clear information about the description and quantity of the material/service, the required date, and other information. PR can be created directly in SAP MM module with ME51N t-code, or indirectly by another SAP component, such as: materials planning, maintenance order of PM module, production order of PP module, network activity of PS module, etc. We have explained this in the previous article about MM integration with other modules. 

SAP PR Document Type

SAP MM Purchasing Process

One of the main areas covered by MM module is Purchasing/Procurement. The purchasing process is initially started when there is a requirement of material/service from a user. If the material/service can not be obtained from company’s internal resource, the responsible person of that company must find the vendor/supplier which can provide it on the required date. The purchasing process is ended when the payment processing to the vendor that supply the material/service has been done.

In this post, I will explain about the basic of the purchasing/procurement process, which usually known as Procurement Cycle as the following steps.

  1. Determination of RequirementsIn this step, there is a requirement of material or service, which must be procured externally, from the user. The requirement must be recorded as Purchase Requisition (PR)document in SAP MM.Purchase Requisition (PR) isan internal purchasing document in SAP ERP that is used to give notification to responsible department about the requirement of material/service and to keep track of such requirement. PR must contain clear information about the description and quantity of the material/service, the required date, and other information. Continue reading

PR Release Procedure: Define Release Strategy (A case study Part 6)

For most SAP MM end-users or SAP MM learners, Purchase Requisition (PR) release strategy is a ‘black box’ process. Many of them don’t understand that topic and get frustrated because there is no good documentation about it.

This book explains the basic concept of PR Release Strategy and step by step guide how to configure it on SAP ERP system. To make it more understandable, it is supplied with a case study and  the screen shots of each configuration step.

The book is written in a simple-to-understand way, so anyone can learn it easily. You don’t need to have extensive SAP configuration skill or experience to be able to configure it.

Continue reading

PR Release Procedure: Define Release Indicator (A case study Part 5)

For most SAP MM end-users or SAP MM learners, Purchase Requisition (PR) release strategy is a ‘black box’ process. Many of them don’t understand that topic and get frustrated because there is no good documentation about it.

This book explains the basic concept of PR Release Strategy and step by step guide how to configure it on SAP ERP system. To make it more understandable, it is supplied with a case study and  the screen shots of each configuration step.

The book is written in a simple-to-understand way, so anyone can learn it easily. You don’t need to have extensive SAP configuration skill or experience to be able to configure it.

Continue reading