Create the Purchase Requisition Using Specified Data
Order ID:89JHGSJE83839 Style:APA/MLA/Harvard/Chicago Pages:5-10 Instructions:
Create the Purchase Requisition Using Specified Data
Data
The data needed to create a purchase requisition are the item category, quan- tity, desired delivery date, and desired delivery location or receiving plant (see Figure 4-14). In addition, a material number is needed for stock items, and an account assignment object may be required depending on the item cate- gory selected. The ERP system uses the material number to obtain additional data from the material master such as description, material group, purchasing group, unit of measure, and valuation price. The delivery date and location are typically provided by the requisitioner, but they can also be obtained from the material master.
Figure 4-14: Data in a purchase requisition
The organizational data needed to create a purchase requisition are the purchasing group and the receiving plant. These data are typically obtained from the material master. User input can provide or override these data as needed.
104 CHAPTER 4 The Procurement Process
CH004.indd 104CH004.indd 104 31/01/11 7:35 PM31/01/11 7:35 PM
Vendor data are optional. When they are included, they indicate a preference for the source of supply. Vendor data include the vendor number and name.
It is also possible to requisition materials that do not have material mas- ter data, but this procedure must be performed manually. Basically, the requi- sitioner provides a description of the material instead of a material number. In addition, he or she provides data that are normally obtained from the mate- rial master, including delivery location, material group, purchasing group, and account assignment category. Further, depending on the account assignment category, additional data such as cost center, asset number, and general ledger accounts can also be included. (At this point you might want to review our discussion of account determination earlier in the chapter.)
Tasks
The only task in this step is to create the purchase requisition using the specified data.
Outcomes
The process document that results from this step is the purchase requisition. The system will assign a unique requisition number to this document, which the concerned parties can use to track its progress through the various steps in the process. Signifi cantly, this step does not generate any fi nancial or manage- ment accounting documents because creating a requisition has no fi nancial impact.1 Moreover, because there is no goods movement (that is, no materials are received), no material document is created either.
In our example, the trigger for the procurement process is low inventory of t-shirts. GBI has determined (through material planning, which we discuss in Chapter 8) that t-shirts must be reordered when there are 50 or fewer left in inventory. In addition, the shirts must be purchased in quantities of 500. GBI was alerted to the need to reorder by an employee in the plant who reviews inventory reports that are printed at the beginning of each day. This individual observed that the inventory of t-shirts at the Miami plant had fallen below 50. As a result, he created a purchase requisition for 500 t-shirts to be delivered to the Miami plant by a specifi ed date.
SOURCE OF SUPPLY DETERMINATION
Once again, a requisition is merely a request for material; it does not represent a legal obligation to purchase anything. In contrast, a purchase order constitutes an obligation to purchase. As Figure 4-15 illustrates, there are three paths to create a purchase order, depending on whether the source of supply is known.
1Although there is no fi nancial accounting impact when a requisition is created, a requisition typi- cally will result in the purchase of the needed materials. To help with planning for anticipated expenses, when purchasing consumable materials, a requisition will result in an internal record of the potential obligation, called a commitment, if the commitment management process in man- agement accounting is in use.
Process 105
CH004.indd 105CH004.indd 105 31/01/11 7:35 PM31/01/11 7:35 PM
If it is, then the requisition can be converted into a purchase order without additional steps (Path 1). In such cases the company selects a vendor from a list of potential suppliers, called a source list. If the source list con- tains only one source, then the system will automatically assign the vendor to the requisition. However, if the source list identifies multiple sources, then the system will display a list of vendors for the user to choose from. Alternatively, the requisition can be satisfied through outline purchase agreements, which are longer-term agreements between an organiza- tion and a vendor regarding the supply of materials or the performance of services within a specified period according to predefined terms and conditions. Outline agreements are subdivided into contracts and sched- uling agreements. During the contract validity period, certain quanti- ties or services are released (called off) against the contract as and when required through the issue of purchase orders. Such purchase orders are thus termed contract release orders or simply release orders. In some non-SAP systems, they are also referred to as call-off orders. In a schedul- ing agreement, the delivery of the total quantity of material specified in the agreement is spread over a certain period according to a delivery sched- ule. The delivery schedule specifies the quantities with their corresponding planned delivery dates.
Figure 4-15: Converting a purchase requisition to a purchase order
If a source of supply is not known, then the company must send a request for quotations (RFQ) to several potential vendors, receive and evaluate the quotations, and then make a fi nal selection. An RFQ is an invitation to vendors by an organization to submit a quote for the supply of the materials or services. A quotation is legally binding on the vendor for a specifi ed period. It identifi es materials or services for which the total quan- tities and delivery dates are specifi ed. In this case, the organization uses a quotation to create a purchase order (Path 2). Finally, in certain cases the RFQ is directly converted into a purchase order without a quotation (Path 3). This may be the case when a vendor provides a quotation verbally and the company does not consider it necessary to enter the quotation data into the system.
In our example, Spy Gear is the only supplier of t-shirts. This informa- tion is ascertained from a source list maintained in the ERP system. Because there is an established supplier, it is not necessary for GBI to request and eval- uate quotes from potential vendors.
106 CHAPTER 4 The Procurement Process
CH004.indd 106CH004.indd 106 31/01/11 7:35 PM31/01/11 7:35 PM
Demo 4.7: Create Purchase Requisition
ORDER PROCESSING
As we previously discussed, a purchase order is a communication sent to a vendor in which a company commits to purchasing the specifi ed materials under the stated terms. Figure 4-16 summarizes the elements of a purchase order.
Figure 4-16: Elements of a purchase order
A purchase order is typically created with reference to a requisition, an RFQ, a quotation, or a previously created purchase order. When reference documents are used to create a purchase order, then much of the necessary data is copied from these documents. In addition, a purchase order can be cre- ated without reference to any document. In this case, all the necessary data are entered manually.
Data
A purchase order includes data from a variety of sources, as shown in Figure 4-17. Besides the source documents, data from several master records, such as material master, vendor master, info records, and conditions, are also included. In addition, data from specifi c agreements and contracts with the selected ven- dor can be incorporated.
Most of the data in a purchase requisition (Figure 4-14) are included in the purchase order. In addition, the purchase order will contain other data depending on how the order is created and which reference documents are used. For example, material characteristics such as weight are included from the material master. Vendor data, such as communication method, contact person, and address, are included from the vendor master or quotation. Pricing data, payment terms, and Incoterms® 2 are included from the quotation, purchas- ing info record, other condition records, or specifi c contracts and agreements with vendors, depending on how the process is confi gured at each company.
2International Commercial Terms defi ne the roles and responsibilities of buyers and sellers with regard to when ownership of materials changes hands and who bears the costs and risks associated with transporting the materials. See International Chamber of Commerce page on Incoterms at http://www.iccwbo.org/incoterms/ for a more detailed explanation.
Process 107
CH004.indd 107CH004.indd 107 31/01/11 7:35 PM31/01/11 7:35 PM
http://www.iccwbo.org/incoterms/
If the necessary data are not available from a reference document, then the user must provide this information manually when he or she is creating the purchase order.
As depicted in Figure 4-18, a purchase order document consists of a header section and one or more item details. The header includes data such as the purchase order number, vendor, currency, dates, and payment terms. These data apply to the entire document, including all line items. The item details section includes data specifi c to each item in the purchase order, such as the material number, description, quantity, delivery date, and price.
Figure 4-18: The structure of a purchase order
Tasks
The primary task in this step is to create and send the purchase order to the vendor. In addition, other steps might be necessary, depending on how the order is created. The most common additional steps involve selecting a ven- dor and then communicating with the vendor to confi rm logistics and delivery details.
Figure 4-17: Data in a purchase order
108 CHAPTER 4 The Procurement Process
CH004.indd 108CH004.indd 108 31/01/11 7:35 PM31/01/11 7:35 PM
Outcomes
The main document created in this step is the purchase order. If the purchase order includes data from reference documents, then multiple documents can be used to generate one order. Conversely, a single reference document can be used to create multiple orders. Thus, as you can see in Figure 4-19, one or more requisitions can generate one or more purchase orders. For example, consider the following scenarios. A purchasing manager receives many req- uisitions for the same materials and decides to consolidate them into a single purchase order and send the order to one vendor, perhaps to take advantage of volume discounts. Alternatively, the requisitions may include a number of different materials that must be purchased from different vendors. In this case, the purchasing manager creates a different purchase order for each vendor that includes the relevant materials.
Figure 4-19: Purchase requisition to purchase order
Purchase requisitions are updated to refl ect the purchase order number(s) assigned to them. This process enables the requisitioner to easily determine the status of each requisition. He or she can also click on the PO document number now referenced on the purchase requisition to view the purchase order and its status.
Although the purchase order is an obligation to acquire materials from a vendor, no fi nancial accounting documents are created because this step has no impact on the fi nancial condition of the organization. (Despite the commit- ment to purchase, no money or goods have been exchanged.) Recall, however, our note concerning commitments in management accounting in the case of a requisition for consumable materials. If a purchase order is created without reference to a requisition, then a commitment is created when the purchase order is created. In addition, no material documents are created because no goods movement (goods receipt) has occurred.
Once the purchase order is created, it must be communicated to the ven- dor. This communication is accomplished using the messaging capabilities of SAP ERP, as depicted in Figure 4-20. SAP ERP utilizes a variety of media, includ- ing print, e-mail, EDI, Web services, and fax. Companies also use the messaging capabilities of the system to send reminders and to request that deliveries be sped up. In turn, the vendor uses these capabilities either to accept or reject the order.
Process 109
CH004.indd 109CH004.indd 109 31/01/11 7:35 PM31/01/11 7:35 PM
Figure 4-21 shows the various options related to the purchase order step. To summarize, a company creates a purchase order using a variety of source documents (or none) and user inputs and then communicates it either to an external vendor or to another plant in the company via one of several com- munication tools.
Figure 4-21: Purchase order processing options
In our example, the purchase requisition created in the previous step is used as the source document to create a purchase order for 500 t-shirts. The ERP system automatically selects Spy Gear as the vendor from the source list and utilizes the purchasing info record to determine the gross price of $15 per t-shirt. Thus, the total cost indicated on the purchase order is $7,500.
Figure 4-20: Communicating with vendors
Create the Purchase Requisition Using Specified Data
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
You Can Also Place the Order at www.collegepaper.us/orders/ordernow or www.crucialessay.com/orders/ordernow