Use

This section provides an overview of external procurement in the MM System.

It discusses:

Features

Procurement for Stock Versus Procurement for Direct Consumption

In the MM System, you procure either for stock or for direct consumption . You can determine the purpose for which ordered materials are being procured in the purchase order, for example.

This section describes the differences between procuring for stock and procuring for direct consumption in the MM System.

Procurement for Stock

A stock material is a material that is kept in stock. Such materials are placed in storage following a goods receipt . When goods are received by or issued from stores or the warehouse, the stock on hand is increased or reduced by the amount of the quantity received or issued.

When you order a material for stock, the system does not require an account assignment . This is because the posting to the appropriate stock and consumption accounts occurs automatically after each goods movement (for example, after a material is received by the stores or issued from stores) . Furthermore, the value and the quantity of the stocked material are updated in the material master record.

To order a material for stock, the material must have a master record . For more information on material master records, refer to Master Records from the Purchasing View .

Procurement for Direct Consumption

When you procure for direct consumption, you specify the consumption purpose by entering an account assignment (for example, a cost center) . On goods receipt, the material or service counts as having been consumed.

If a material is procured for direct consumption, the consumption accounts in Financial Accounting are posted when the goods receipt is entered . The total quantity and value of existing stocks of the material are not affected.

Material Account Assignment

For each item of a purchasing document, you specify whether procurement is for stock or for direct consumption . In a purchasing document, you can enter items with or without account assignments.

If you order stock materials, the ordered material must have a material master record . If you order consumable materials, the ordered material may have a material master record.

Account assignments are possible for the following purchasing documents:

Forms of Procurement

Before ordering a material or service from a vendor, you must decide which purchasing instrument you wish to employ . This section describes the three basic forms of external procurement supported by the MM Purchasing component:

One-Time Purchase Order

You use one-time orders for materials or services that you order irregularly .

You can reference a purchase requisition, RFQ, or another PO when creating a one-time order . The vendor’s current conditions for the material are adopted from the purchasing information record when the new PO is created.

For more information, refer to the section Purchase Orders

Contract and Release Orders

For materials that are ordered regularly and in sufficient quantity, you can negotiate longer-term pricing and conditions with the vendor and record them in a contract. In the contract, you specify its validity period and the total target quantity or total dollar value covered.

When creating a contract, you can reference an RFQ or another contract . The contract requisition (representing a request to set up a longer-term contract) can also simplify the data entry process by serving as a reference document.

When you create the associated release orders, information is adopted from the contract . Individual deliveries are effected on the basis of the release orders, which specify the exact order quantity and the delivery date.

For more information, refer to the section Outline Agreements with Vendors .

Scheduling Agreement

If a material is ordered on a regular basis and is to be delivered according to an exact time schedule, then you set up a scheduling agreement . This method of procurement is typically used when Just-in-Time deliveries are required from the vendor (for example, in the automobile industry).

As in the case of the contract, the material and the basic conditions are specified in the scheduling agreement . Once you have set up the agreement, you can create delivery schedules with individual schedule lines specifying exact quantities, delivery dates, and times extending over a certain period into the future.

For more information, refer to the section Outline Agreements with Vendors .