Automatic Source Determination in the Procurement Process

You can automate various steps in the procurement process. Thus, material requirements can be determined through materials planning. This relieves the burden on user departments, since it is not necessary for purchase requisitions for required items to be created manually. The automatic conversion of requisitions into purchase orders is another way of simplifying the procurement process.

Figure 157: Automated Procurement: Source Determination

To be able to convert an item of a purchase requisition into a PO automatically, the system must know from which vendor and at which price the material is to be procured.

When creating the purchase requisition, the requester can choose a source for the item. As a rule, however, the purchasing department is responsible for assigning sources. In the source selection process, you can have the system support you by suggesting a list of existing sources.

Figure 158: Conversion of Requisition into a Purchase Order

A source of supply can be both a vendor (external supplier) and one of your enterprise's own plants. External sources are represented by purchasing info
records and outline agreements. For these sources or supply, the vendor and the price of the material can be taken from the relevant record or document.

Figure 159: Overview of Sources of Supply

A purchasing info record is a repository of information for purchasing. It contains data on a certain material and the supplier of that material. The information may
include the current vendor price, the vendor's planned delivery time, and the name by which the vendor refers to the material.
An outline agreement is a longer-term arrangement with a vendor for the supply of materials or provision of services based on predefined terms and conditions.
This arrangement is valid for a certain period and for a predetermined total purchase quantity or value. There are two types of outline purchase agreement:
• Contract
• Scheduling agreement

An outline agreement does not contain specific delivery dates or quantities of individual deliveries. You specify these subsequently, in either a contract release
order or a scheduling agreement delivery schedule, depending on the type of agreement. In the next section, we take a closer look at the contract.