Understanding the Procurement Process: A Guide to Creating Purchase Requisitions (PR) and Managing Procurement-to-Pay Steps
The procurement process is a critical part of any business operation. It ensures that all necessary materials, goods, and services are obtained in the most efficient and cost-effective manner. Here’s a breakdown of the first steps in this process, focusing on the creation of Purchase Requisitions (PR) and the steps in the Procurement-to-Pay cycle.
Step 1: Creating a Purchase Requisition (PR)
Creating a Purchase Requisition is the starting point for procurement. This step involves different departments, such as production, sales, and administration, to identify and document their requirements for materials and goods.
The Purchase Requisition (PR) contains essential details such as:
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Estimated costs: The expected price for the goods or services.
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Material descriptions: A detailed description of the items required.
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Quantity needed: The amount of materials needed for production, sales, or other purposes.
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Preferred vendors: Vendors that the organization prefers to work with for specific materials.
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Requested delivery dates: When the materials are needed for use.
These requisitions undergo a thorough review process to ensure they meet organizational needs and budgetary constraints. In many cases, Release Strategies are used to ensure that the requisitions are in line with established guidelines.
In SAP systems, the ME51N transaction code is used to create Purchase Requisitions. This code allows the procurement team to input all necessary details and submit them for review and approval.
Step 2: Review and Vendor Selection
Once the requisition is created, it is reviewed by the Purchasing Department to determine whether the needed materials are already in stock or if they need to be sourced externally. This review process helps to avoid unnecessary purchases and to optimize inventory.
The procurement team also evaluates potential vendors to ensure the best prices, quality, and delivery timelines. In SAP, this can be done using the Vendor List or Source List, which identifies approved vendors for specific materials. These lists help streamline the vendor selection process and ensure that only reliable suppliers are considered.
Step 3: Request for Quotation (RFQ)
After vendor selection, the next step is to send out Requests for Quotations (RFQs). These RFQs are sent to various suppliers to obtain quotes for the required materials. The procurement team then reviews the quotes to compare prices, delivery times, and other terms.
SAP simplifies this process with the ME41 transaction code, which facilitates the creation of RFQs. The quotes received from vendors are evaluated, and the best option is chosen based on a range of factors, such as price, reliability, and lead time.
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