Materials and Suppliers – Strategic ProcurementMaterials and Suppliers – Strategic Procurement

Richard Byrom

Oracle Applications Consultant

Enterprise Resource Planning Seminar – 24th May 2002

Richard Byrom

Oracle Applications Consultant

Enterprise Resource Planning Seminar – 24th May 2002

ObjectiveObjective

To illustrate how

ERP systems add value

to the procurement

process

To illustrate how

ERP systems add value

to the procurement

process

Procurement ProcessProcurement Process

Requisitions

Purchase Orders

Receiving

Payment

SupplierPerformance

Catalog Content

Management

Supplier Management

OrderingSourcing

Analysis

Negotiations & Awards

Procurement ProcessProcurement Process

Requisitions

Purchase Orders

Receiving

Payment

Ordering

Without ERP Systems in ProcurementWithout ERP Systems in Procurement

• Disparate and fragmented systems do not talk to each other

• Information is not appropriately shared between applications

• Too much paper!

• Risk of error is high

• Transactions costs are inevitably increased

• Disparate and fragmented systems do not talk to each other

• Information is not appropriately shared between applications

• Too much paper!

• Risk of error is high

• Transactions costs are inevitably increased

Procurement Process FailureProcurement Process Failure

Requisitions

Purchase Orders

Receiving

Payment

Ordering

Benefits of ERP systems in ProcurementBenefits of ERP systems in Procurement

• Create, edit and view purchasing documentation on-line in one application (no re-entry of document information i.e information flow is ensured across applications)

• Review the current status and action history of all purchasing documentation

• Route purchasing documentation according to approval hierarchies

• Enables accurate and automated accounting for all transactions

• On line approvals – less paper

• Reduced total transaction costs

• Create, edit and view purchasing documentation on-line in one application (no re-entry of document information i.e information flow is ensured across applications)

• Review the current status and action history of all purchasing documentation

• Route purchasing documentation according to approval hierarchies

• Enables accurate and automated accounting for all transactions

• On line approvals – less paper

• Reduced total transaction costs

Purchase RequisitionsPurchase Requisitions

Why Purchase Requisitions?Why Purchase Requisitions?

• Purchase requisitions allow you to decentralise your purchasing department by having requesters

• Purchase requisitions allow you to source your requisition with the best suppliers and at the lowest cost

• Purchase requisitions ensure that the appropriate management approval is given before purchase orders are created.

• Purchase requisitions allow you to decentralise your purchasing department by having requesters

• Purchase requisitions allow you to source your requisition with the best suppliers and at the lowest cost

• Purchase requisitions ensure that the appropriate management approval is given before purchase orders are created.

Where Purchase Requisitions FitWhere Purchase Requisitions Fit

Inventory WIP MRP

Demand

RequisitionRequisitionRequisitionRequisition

poolpool

Order entryOrder entry

Import/rescheduleImport/reschedulerequisitionsrequisitions

Approve SupplierSupplier

InternalInternalsales ordersales order

ManuallyManuallycreatecreate

ApprovalApproval

Order Mgmt

Business Needs Associated with Purchase Requisitions

Business Needs Associated with Purchase Requisitions

• Automate the procurement process

• Monitor and control spending amounts by approval authorizations

• Simplify the interaction with suppliers

• Free buyers from daily transactions to focus on negotiation management and supplier analysis

• Reduce administrative costs and inefficiencies

• Automate the procurement process

• Monitor and control spending amounts by approval authorizations

• Simplify the interaction with suppliers

• Free buyers from daily transactions to focus on negotiation management and supplier analysis

• Reduce administrative costs and inefficiencies

Who Acts on Purchase Requisitions?Who Acts on Purchase Requisitions?

• Employee

• Buyer or buyer-planner

• Approvers

• Suppliers

• Purchasing staff

• Employee

• Buyer or buyer-planner

• Approvers

• Suppliers

• Purchasing staff

Purchase OrdersPurchase Orders

Why Create Purchase Orders?Why Create Purchase Orders?

• Supplier is selected to satisfy demand for goods or services

• Summarize all demand for a given item or category

• Supplier terms and conditions established

• Contract with a supplier: external or internal

• Business need for goods or services is formalized

• Supplier is selected to satisfy demand for goods or services

• Summarize all demand for a given item or category

• Supplier terms and conditions established

• Contract with a supplier: external or internal

• Business need for goods or services is formalized

Where Purchase Orders Come FromWhere Purchase Orders Come From

OracleWIP

Othersystems

DemandDemand

Manually Manually

createdcreated

AutomaticallyAutomaticallyimportedimported

CreateCreatepurchase orderspurchase orders

Oracle Inventory

OracleMRP

RequesterRequesterRequisitionsRequisitions

OracleWIP

Othersystems

Oracle Inventory

OracleMRP

Oracle Order Mgmt

Procurement Solution enables you to:Procurement Solution enables you to:

• Create purchase orders easilyCreate purchase orders easily

• Create purchase orders from:Create purchase orders from:

– RequisitionsRequisitions

– QuotationsQuotations

– Other purchase ordersOther purchase orders

• Create one time and repeated purchase ordersCreate one time and repeated purchase orders

• Flexible approval and security controlsFlexible approval and security controls

Manually Create Purchase Orders Using Procurement Solution

Manually Create Purchase Orders Using Procurement Solution

Purchase InvoicesPurchase Invoices

Entering Purchase Order Matched Invoices : Overview

Entering Purchase Order Matched Invoices : Overview

Receive invoiceReceive invoice Enter invoiceEnter invoice

Approve invoiceApprove invoice

Match invoicesto PO or receipt

File invoice File invoice Account for Account for invoice invoice

View invoiceView invoice

Pay invoice Pay invoice

Why Enter Purchase Order Matched Invoices?

Why Enter Purchase Order Matched Invoices?

• Match Payables invoices to purchase orders to ensure that you pay only for the goods that you have ordered.

• Match to purchase order receipts to ensure that you pay only for goods that you have received.

• Payables automatically creates invoice distributions based on the purchase order distributions.

• Match Payables invoices to purchase orders to ensure that you pay only for the goods that you have ordered.

• Match to purchase order receipts to ensure that you pay only for goods that you have received.

• Payables automatically creates invoice distributions based on the purchase order distributions.

You Can Set Up Controls That Require You To Do The Following:

You Can Set Up Controls That Require You To Do The Following:

• Purchase order match each invoice

• Match the invoice to either a purchase order or receipt

• Match within amount or quantity tolerances

• Purchase order match each invoice

• Match the invoice to either a purchase order or receipt

• Match within amount or quantity tolerances

Accounting Entries should be created at each stage of the process

Accounting Entries should be created at each stage of the process

• Record items into inventory or expenses

• Appropriate valuation of stock should take place

• Physical and Monetary Variances between requisition and order should be recognised

• Physical and Monetary Variances between order and invoice should be recognised

• Account for invoice and payment into creditors

• Record items into inventory or expenses

• Appropriate valuation of stock should take place

• Physical and Monetary Variances between requisition and order should be recognised

• Physical and Monetary Variances between order and invoice should be recognised

• Account for invoice and payment into creditors

ConclusionConclusion

ERP is the best solution for your

organisations procurement problems

ERP is the best solution for your

organisations procurement problems