The system uses process categories to differentiate between the different types of procurement, with the central element in the value chain being the procurement process. Procurement processes deal with both internal and external procurement.

Examples of this are:

• Subcontracting (external procurement)
• In-house production (internal procurement)
• Stock transfer (internal procurement)

In the case of in-house production, procurement processes are called production processes. As a rule, a procurement process produces exactly one valuated material.

In the following situations, however, a procurement process can produce multiple valuated materials:

• Joint production
• Split valuation according to batch
• Valuated sales order stock

If multiple materials are produced or procured with one procurement process, it may be necessary to divide up these costs. The costs are divided among procurement alternatives that are then assigned to the particular material. If one process produces one material there is then a 1: 1 ratio between the procurement alternative and procurement process. If, however, a procurement process produces multiple materials, multiple procurement alternatives are then assigned to that process.

If Actual Costing/Material Ledger is active, a procurement alternative is created for each material at plant level. The Controlling level affected is called Material/Plant. You can analyze costs and quantities in greater detail if you set the Controlling level more precisely, i.e. if you add Production Version to the characteristics.

Mixed Costing

Production Processes

Product Cost Collectors

Procurement Alternatives

Procurement Processes