Purpose

The purchase order can be used for a variety of procurement purposes. You can procure materials for direct consumption or for stock. You can also procure services. Furthermore, the special procurement types "subcontracting", "third-party" (involving triangular business deals and direct-to-customer shipments) and "consignment" are possible.

You can use purchase orders to cover your requirements using external sources (where a vendor supplies a material or performs a service). You can also use a purchase order to procure a material that is needed in one of your plants from an internal source, that is from another plant. Such transactions involve stock transfers. The activities following on from purchase orders (such as the receipt of goods and invoices) are logged, enabling you to monitor the procurement process.

You can use purchase orders for once-only procurement transactions. If, for example, you wish to procure a material from a vendor only once, you create a purchase order. If you are thinking of entering into a longer-term supply relationship with this vendor, it is advisable to set up an outline agreement, since this usually results in more favorable conditions of purchase.

In the interests of optimized purchasing, the PO quantity can be rounded in the course of PO processing to allow full advantage to be taken of negotiated conditions or to optimize utilization of existing transport capacities.

For more information, see Optimizing the Order Quantity .

Because not all materials or services to be procured justify the effort involved in individual monitoring, you can also create a purchase order with an extended, predefined validity period and a value limit. (You may wish to do this when procuring office supplies, for example.) This type of purchase order is similar in nature to the "contract".

In this case, you need not specify the individual materials or expend any effort with respect to goods receiving activities. You can also reduce the amount of work involved in invoice verification to a minimum by employing automatic processes.

See also:

External Services Management (MM-SRV)

MM Vendor Evaluation

Managing Special Stocks (MM-IM) (for information about special types of ordering, such as consignment, subcontracting, or inter-company stock transfers).