Procurement business process

1. Procurement

2. Process
• Procurement is the process of sourcing material from vendor, inspecting it and finally paying the
vendor for accepted materials.
• Procurement is a requirement for almost every organisation which is why it is considered as a very
fundamental module of any ERP system.

3. Procurement planning:
• Determining what to buy and how much—The first step of procurement
• cycle is deciding what items to buy and of how much (quantity). This
process is also called procurement planning process and depending on
type of items,
• For regular production items i.e. items that are needed for producing
finished goods, a detailed material requirement planning process is
needed,

4. Determination of the source of supply and selecting vendor:
• Determining the right source of supply
is the next challenge for buyer. Once buyer identifies few technically capable
vendors, he asks for a price quotation and delivery terms from them.
Once price and commercial terms of different vendors are compared,
purchaser finally selects the vendor for the particular item.

5. • In this step a purchase order is created with item details,
quantity, price, delivery terms, etc.
• This is a legal document between the company and the vendor.

6. • Goods receipt: In this step goods are received.
• There can be several checks during goods receipt process like quantity
check quality check etc.
• Goods receipt is generally happens at factory level where a goods receipt
posting to stock with reference to a purchase order is done.

7. Processing vendor payment and invoice
verification:
• The final step of procurement process is paying vendors after verifying the
invoice submitted by him.

8. ERPs Support Procurement Process
• Determining what to buy and how much—
• ERPs support different strategies of procurement planning and automatic
based on finished goods requirement and past sales.
• ERPs also support manual creation of purchase requisition in the system
for requirements not regular in nature.
• Generally for material planning, an MRP procedure need to be setup in the
material master and based on this setting

9. Determination of the source of supply
and selecting the vendor:
• ERP systems help buyers determining
• possible sources of supply, provided vendor information is maintained in
the system and vendor
• material linkage (i.e. which vendor supplies what material) is available in
the system.
The system supports creation of requests for quotation (RFQs). RFQs can
be sent to vendors and their responses can be entered into the system.
The system helps in selection of vendors by making price comparisons
between various quotations.

10. Purchase order creation:
• The ERP system facilitates purchase orders,
• as the vendor and material code is entered, the system populates relevant vendor and
material details (vendor name, address, tax code, material description, UOM (unit of
measure), etc.) from masters.
• Purchase order creation is also facilitated by copying relevant terms and conditions from
condition master. The system also calculates pricing discounts based on conditions and
apply the same in purchase order.
• monitored online goods or invoice purchase order item.
• The system also supports sending purchase order electronically to vendors.