Oracle Purchasing
Purchasing refers to a business or organization attempting to acquire goods or services to accomplish the goals of the enterprise. Though there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly between organizations.
In Simple
· To buy a product or service.
· A product or service that has been bought by an individual or business.
Purchase order:
A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. Acceptance of a PO by a seller usually forms a one-off contract between the buyer and seller, so no contract exists until the PO is accepted.
Buyer:
A "buyer" or merchandiser is a person who purchases finished goods, typically for resale, for a firm, government, or organization. (A person who purchases material used to make goods is sometimes called a purchasing agent.)
Seller:
A vendor, or a supplier, is a supply chain management term meaning anyone who provides goods or services to a company. A vendor often manufactures inventoriable items, and sells those items to a customer.
Procurement Life cycle:
Procurement life cycle in modern businesses usually consists of seven steps:
· Information gathering: If the potential customer does not already have an established relationship with sales/ marketing functions of suppliers of needed products and services (P/S), it is necessary to search for suppliers who can satisfy the requirements.
· Supplier contact: When one or more suitable suppliers have been identified, requests for quotation (RFQ), requests for proposals (RFP), requests for information (RFI) or requests for tender (RFT or ITT) may be advertised, or direct contact may be made with the suppliers.
· Background review: References for product/service quality are consulted, and any requirements for follow-up services including installation, maintenance, and warranty are investigated. Samples of the P/S being considered may be examined or trials undertaken.
· Negotiation: Negotiations are undertaken, and price, availability, and customization possibilities are established. Delivery schedules are negotiated, and a contract to acquire the P/S is completed.
· Fulfillment: Supplier preparation, expediting, shipment, delivery, and payment for the P/S are completed, based on contract terms. Installation and training may also be included.
· Consumption, maintenance, and disposal: During this phase, the company evaluates the performance of the P/S and any accompanying service support, as they are consumed.
· Renewal: When the P/S has been consumed and/or disposed of, the contract expires, or the product or service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be re-ordered, the company determines whether to consider other suppliers or to continue with the same supplier.
Purchasing Flow:
Requisition:
A requisition is a request for something, especially a formal system request or written request on a pre-printed form. Items are often requisitioned during times of conflict, or natural disasters, to aid the efforts.
An online requisition is an electronic document, which can be originated by the requester and then using the company workflow or hierarchy rules, can be submitted to the subsequent levels, until it is finalized or approved and then converted to a purchase order. While reviewing the electronic requisition, the reviewer should have the ability to check different parameters of the requisition with regard to the inventory levels and financial controls.
Requisition main tables:
PO_Requisition_Headers_All: it stores information about requisition headers. Each row contains the requisition number and Addition relevant information. REQUISTION_HEADER_ID is primary key.
HR_Employees: it's a view that contains information about employees. You must have a row for each requestor, requisition preparer, approver, buyer or receiver. The primary key is EMPLOYEE_ID.
PO_Requisition_Lines_All: This table stores the information about the requisition lines like quantity, item, deliver to location, requestor etc. Primary Key is REQUISTION_LINE_ID
MTL_System_Items_B: This is the definition table for items. This table holds the definitions for inventory items, and purchasing items. The primary key is INVENTORY_ITEM, ORGANIZATION_ID.
PO_REQ_Distributions_All: This table stores the information about the accounting distributions associated with each requisition line. Each requisition line must have at least one accounting distribution. Each row includes the accounting flex field id and requisition line quantity. The primary key is DISTRIBUTION_ID.
GL_CODE_Combinations: This table stores valid Accounting Flex Field segment value combination for each accounting flex field structure within your GL application. GL_CODE_COMBINATIONS is populated by the system when a new accounting flex field combination is used, either through dynamic insertion or manually.
Types of Requisition:
1. Internal Requisition
2. Purchase Requisition
Navigation: Purchasing -->Requisitions --> Requisitions
1. Internal Requisition:
Internal Requisitions provide the mechanism for requesting and transferring material from inventory to other inventory or expense locations
Screen shot
Requisition Header region:
1. Requisition number will be assigned automatically once the requisition is saved.
2. Set document type to Internal Requisition
3. Enter a requisition description if desired
4. Preparer defaults based on your login
5. Status and Total fields are populated when the requisition is saved
Requisition Details - Item lines region:
1. In the Type field, "Goods" is the default and required for Internal Requisitions
2. Enter Item Number or choose from list of values
3. Enter the required quantity
4. Price would default from the Item details
5. Enter Need-By-Date
Requisition details - Bottom portion
1. Enter the destination type. Enter "Inventory" - All Internal Requisitions for inventory transfers. Enter "Expense" - All Internal Requisitions for inventory issues
2. Requestor defaults from Preparer. User could Accept or modify if different
3. Select Deliver-To Organization
4. Select Ship-To Location
5. Select Ship-To Sub inventory
6. In the source, enter "Inventory" for internal inventory transfers
7. Select Source organization
8. Select Sub inventory (Optional)
Click Distribution button and enter the information
1. The line number and quantity field will default from the parent requisition line
2. If Inventory is selected as Type, the material account from the organization or sub inventory will default. If Expense is selected, the charge account number from the item’s “Expense Account” will default
3. Review or Modify Charge Account
Save and approve the requisition.
2. Purchase Requisition:
The Purchase Requisition is the procedural method by which different departments of organization may request the purchase of goods and/or services, which require processing by Procurement Department.
Requisition Header region:
1. Requisition number will be assigned automatically once the requisition is saved.
2. Set document type to Purchase Requisition
3. Enter a requisition description if desired
4. Preparer defaults based on your login
5. Status and Total fields are populated when the requisition is saved
Requisition Details - Item lines region:
1. In the Type field, "Goods" is the default and required for Purchase Requisitions
2. Enter Item Number or choose from list of values
3. Enter the required quantity
4. Price would default from the Item details
5. Enter Need-By-Date
Requisition details - Bottom portion
1. Enter the destination type. Enter "Inventory" - All Internal Requisitions for inventory transfers. Enter "Expense" - All Internal Requisitions for inventory issues
2. Requestor defaults from Preparer. User could Accept or modify if different
3. Select Deliver-To Organization
4. Select Ship-To Location
5. Select Ship-To Sub inventory
6. In the source, enter "Supplier" for Purchasing from supplier
7. Select Supplier (Optional)
Click Distribution button and enter the information
1. The line number and quantity field will default from the parent requisition line
2. If Inventory is selected as Type, the material account from the organization or sub inventory will default. If Expense is selected, the charge account number from the item’s “Expense Account” will default
3. Review or Modify Charge Account
Review the Requisition save and Approve.
Requisition Approval
1. Requisitions can be set up to allow the requestor to approve his or her own requisitions. The completed requisition can be submitted to an approver for approval.
2. The approver can use the Approve Documents or Notifications form to approve, forward, reserve, accept or reject submitted requisitions. Before approval, the requisition can be viewed or modified by the approver. A rejected request returns to the requester.
3. Requisitions returned as “not approved” may be modified by the requestor and re-submitted for approval from the Enter Requisitions form
Requisitions Status:
· AUTHORIZATION_STATUS – System Lookup code
o APPROVED Document has been Approved
o CANCELLED Document has been Cancelled
o IN PROCESS Document is still undergoing Approval
o INCOMPLETE Document is not yet Complete
o PRE-APPROVED Document is Approved but not yet Accepted
o REJECTED Document as been Rejected
o REQUIRES REAPPROVAL Requires Re-approval
o RETURNED Document has been Returned
Auto Create Document Options:
· Enter selection criteria for your requisition lines in the Find Requisition Lines window
· Choose whether to create a new document or add to an existing document.
· In the Auto Create Documents window, select the Document Type: Standard Purchase Order, Planned Purchase Order, Blanket Release, or RFQ.
· Choose the Grouping method: Default - requisition lines for the same item, revision, line type, unit of measure, and transaction reason are combined into individual purchase order lines; and requisition lines for the same item, revision, and line type are combined into individual RFQ lines
· Choose Automatic or Manual creation mode to place the requisition lines onto a document. Based on the results of your search and on how you want the auto created document to look, you can decide whether Automatic or Manual creation mode is more appropriate
Purchase order Types:
· Standard Purchase Orders: You generally create standard purchase orders for one-time purchase of various items. You create standard purchase orders when you know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions.
o Suggested Use: Choose a standard purchase order when you require vendor commitment to specific items/services, quantities and delivery schedules, but a long-term agreement is not appropriate.
· Blanket Purchase Agreements: You create blanket purchase agreements when you know the detail of the goods or services you plan to buy from a specific supplier in a period, but you do not yet know the detail of your delivery schedules. You can use blanket purchase agreements to specify negotiated prices for your items before actually purchasing them. Blanket purchase agreements can be created for a single organization or to be shared by different business units of your organization (global agreements).
Much organization it is sometimes called as "standing order" or an "open order".
o Suggested Use: Choose a blanket agreement when you've negotiated volume discounts and want to create releases against these negotiated volumes, or when you commit to specific items, quantities or amounts.
· Blanket Releases: You can issue a blanket release against a blanket purchase agreement to place the actual order (as long as the release is within the blanket agreement affectivity dates).
· Contract Purchase Agreements/Order: You create contract purchase agreements with your suppliers to agree on specific terms and conditions without indicating the goods and services that you will be purchasing. You can later issue standard purchase orders referencing your contracts.
o Suggested Use : Negotiate pricing on your entire volume of business. Use a contract to manage terms and conditions for this type of negotiation; couple it with a catalog quotation to reference pricing on a per item basis when you create standard purchase order lines.
· Global Agreements: You may need to negotiate based on an enterprises' total global purchase volume to enable centralizing the buying activity across a broad and sometimes diverse set of businesses. Using global agreements (a special type of blanket purchase agreement), buyers can negotiate enterprise-wide pricing, business by business, then execute and manage those agreements in one central shared environment. Enterprise organizations can then access the agreement to create purchase orders that leverage pre-negotiated prices and terms.
· Planned Purchase Orders: A planned purchase order is a long-term agreement committing to buy items or services from a single source. You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities, and estimated cost.
Comparison:
Standard PO / Blanket Agreement / Planned PO / Contract AgreementGoods & Service Known / Yes / Yes / Yes / Yes
Terms & Condition Known / Yes / Yes / Yes / No
Price Known / Yes / Price Break / Yes / No
Quantity Known / Yes / No / Yes / No
A/C ing Distribution Known / Yes / No / Yes / No
Delivery Schedule Known / Yes / No / Estimate / No
Supplier Shipment Authorization / Standard / Release / Release / Standard
Approval:
Types of Hierarchy:
In PO there are two methods to route documents for approval.
· Approval Hierarchies (uses position hierarchies)
· Employee/Supervisor Relationships (use employee/supervisor relationship)
Approval Hierarchies
Purchasing utilizes positions as a roadmap to determine how and where documents will be routed once the approval process has been initiated. It is first necessary to have created all positions that are going to be used in the system. Once all positions have been created, it is necessary to build the position hierarchy.
Each position has approval limits, so when a purchase order exceeds the limits of the position, the purchase order is forwarded onto the next position in the Hierarchy
Employee/Supervisor Relationships
This type of hierarchy does not use the Approval Hierarchy form, but is defined by the employee/supervisor relationship. The supervisor of an employee is defined on the Assignment region of the Employee form
If the purchase order entered by the employee exceeds the approval limits, the purchase order is forwarded onto the employees' supervisor, as defined on the Employee form
To implement this form of approval routing, you need only to define JOBS. The JOB will then serve as the tie to the Approval group, and based on the approval limits from the Approval Group, the Document will either be Approved or Forwarded to the Employees Supervisor.