The Procurement
Process
Introduction (1)
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The procurement process involves purchasing
goods from vendors through an internal
purchasing organization
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These goods might be used
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for resale
in a manufacturing process
as packaging
Introduction (2)
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Processes
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Vendors must be managed
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Purchase orders are issued (automated)
Goods are received into inventory
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Supplier agreements
(warehouse)
Generates automated accounting transactions
Invoices are verified (automated) (accounting)
Payments are made (automated) (accounting)
Vendors
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Vendors (suppliers) sell goods to us
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Some information is pertinent to the company
Some is accounting related
We should have secondary suppliers
We have pricing agreements
Vendors (Automated
Assignment)
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We have supplier agreements with vendors to
automate procurement
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Generate automatic purchase orders
It’s accomplished through agreements
Purchasing
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Purchasing can be centralized or
decentralized
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Centralized (one purchasing organization for
many plants)
Decentralized (many purchasing organizations)
When to use one over another?
Organizational Structure
(Plants 1)
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In plants, we make things, store things, or do things
 A plant has a purchasing organization assigned to
it
 In OFBiz we make and store things in a
warehouse
 There is a hierarchical relationship between the
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Company
It’s plants
The storage locations within a plant
Materials Introduction
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Materials are the things we buy from vendors
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Supplies that we consume internally
Trading goods that we buy and resell
Raw materials that we use in production
Semi-finished goods (assemblies) that we make
from raw materials and use in the production of
finished goods
Finished goods that we make and sell using raw
materials and semi-finished goods (assemblies)
Purchasing Information
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We purchase materials from vendors
Purchasing information defines the
relationship between a vendor and a material
This information is used to create purchases
from
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Quotations
Manually
Standard Purchasing
Documents
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Purchase requisition
Request for quotation
Purchase order
Goods receipt
Vendor invoice processing
Common Purchasing Sequence
Purchase Requisition
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An internal rather than external document
It instructs purchasing to request specific
goods be purchased to arrive at a specific
time
A requisition gets created
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Manually
Automatically through MRP, production orders,
or sales orders
Requisition Sourcing
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Requisitions must be assigned a source of
supply
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Internally
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A list of sources
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Vendors who provide the particular material
Outlined agreements
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Get goods from our own plant or centralized
warehouse
Long-term purchasing agreements
RFQ
Request for Quotation
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Use for very expensive goods or goods with
no known source
It’s an invitation for a vendor to bid
Quotations from vendors are legally binding
offers
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Price, materials, shipping details are all defined
Vendor Evaluation
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SAP allows you to evaluate vendors based on
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Price
Quality
Delivery
You define scoring ranges
You define detailed criteria
Purchase Order
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It’s really the acceptance contract for the
vendor’s quotation
A request to procure specific materials or
services and the conditions of procurement
Types of Purchase Orders
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Standard
For services
For consignment
And others
An Order 
Purchase Order Structure
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Remember the structure of a document
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Header information
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Item overview
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Vendor / payment terms
Materials, quantities, item delivery dates
Line items
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Item prices
Purchase
Order
(OrderHeader)
Purchase
Order
(OrderItem)
Purchase Order Output
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All is not printed
Purchase orders might be sent via
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E-mail
EDI
Fax
XML
These are just communication entities
ERP Order Automation
Goods Receipt
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Here is where we receive the goods from the vendor
from our purchase order
 This is a warehouse function not a purchasing
function!
Tasks
 Determine whether order is correct
 Update purchase order history with receipt of
goods (automatic)
 Updates physical inventory (automatic)
 Updates G/L account (Inventory) (automatic)
Receipt of Goods (Events)
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Several events fire when goods are received
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Material document created
Accounting documents created
Inventory is updated
Purchase order status is updated
Vendor Invoice Processing
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Invoices are validated against the
corresponding purchase order
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Discrepancies might cause the invoice to be
blocked
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When processed
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The accounts payable liability is created
Payment process is initiated for financial
accounting
Much of the invoice processing can be
automated
Financial Accounting
Processing
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Accounting pays the invoice
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Payment method
Bank
Items
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It’s possible to pay all or part of an invoice
Medium
Can be done manually or automatically
ERP Automated Processing
Material Movement (2)
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Goods can be placed into different
destinations
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Into the warehouse
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Unrestricted use
Blocked use
Quality assurance
More later when we talk about materials
management