Procurement Cycle: 3. Vendor Selection




Vendor Selection is the third step of a procurement / purchasing cycle.
If, in the previous step about source of supply determination, there are some outline agreement or info record documents that can be used as references to create a PO, the buyer can select or choose which vendor that will be appointed to provide the material/service at this time.
If there is no outline agreement or info record documents that can be used as references to create PO, the buyer will send the RFQ documents to one or some vendors. The vendors will send their quotations which include the information about the price, delivery terms, terms of payment, etc that they offered to the company. The buyer can input that information into SAP with ME47 t-code.
Price Comparison
After all vendor’s quotation have been maintained in SAP, the buyer can perform the Price Comparison transaction with ME49 t-code. With this t-code, SAP ERP will show the list of Quotations in one bidding process (by entering all the RFQ numbers or the collective number of the bidding on the initial screen), complete with the price and delivery date of each quotation.
SAP can also calculate the mean (average) of the price offered by all vendors. In this transaction, the buyer can also save the mean value of Quotations price as “market price”. Market price of a material can be seen with MEKH t-code. The market price is used as the basis for valuating the price level of a vendor and is called up for vendor evaluation. Vendor evaluation is an important process in Purchasing to improve the strategic and long-term vendor relationships.
If needed, the buyer can negotiate with one or more vendors about their offering. If the vendors agree, they can submit their updated quotation, and the buyer perform the maintain quotation (ME47) transaction for the updated quotation.
The buyer or other responsible person can choose which vendor should supply the material/service specified in the RFQ. The usual aspects that usually used in determining the winning vendor of a bidding process are:
  • The price condition (gross price, discount, surcharge, net price)
  • The delivery date
  • Terms of payment
  • Incoterm
  • Others, such as technical score, warranties, after sales service, vendor evaluation score, etc.
The winnning vendor then will be given a Purchase Order (PO) document that refers to the quotation.
In the next article I will explain more about PO processing.

3 thoughts on “Procurement Cycle: 3. Vendor Selection

  1. Pingback: Procurement Cycle - Purchase Order Processing | iERP.us - Integrated ERP Software Solution Guide: SAP ERP

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