Hi all, In this blog I would like to speak about the procurement processes and scenarios that exist in Supply Chain Management. Procurement means purchasing goods and services internally or externally from a vendor. Let us look at the different types of procurement processes.
Procurement starts with requirements which are the needs of the users in the company. This in ERP becomes a Purchase Requisition. This document is sent to the procurement department to determine the best supplier for it that is, determination of sources of supply (SOS). Here a RFQ process takes place and a set of vendors send in their bids. Vendor selection takes place and an order is placed with the vendor through Purchase Order. Till here all the activities has been happening internally in the ERP system. A PO (Purchase Order) goes as a requisition to the vendor and the arrange for the goods and send it to the Purchaser. This part is External processing and all this while PO monitoring has been happening at the ERP side. Sometimes if a specific deadline is missed then a reminder is sent to the vendor to dispatch the goods in a process known as dunning. Once the goods reach the purchaser then a goods receipt is issued to the customer and invoice processing is started. Here the bill from the customer is received and verification is done followed by which payment is done.
When plant 1 needs certain goods and they realize that within the same company at another plant these goods are available, then a internal procurement occurs. The plant that requires the goods orders the materials from another plant. A Stock transport order is raised from plant 1 to plant 2. Plant 2 receives this document and issues the goods. The stocks move across the plants and plant 1 provides a goods receipt. It stores it internally. There is no payment done as it is within the same company and only movement of goods has occured.
We need some add-on to be done on our raw material. Ex. Stickers on soda bottles. The company provides the sub contractor with the bottle and the subcontractor sticks the stickers as per the requirement of the company. Once the product is completed, the sub contractor issues the goods and invoice. The goods receipt and invoice verification followed by payment process occurs at the company’s side.
Here the vendor supplies the goods in advance and it is stored in the premise of the company. As and when a need arises in the company, the goods is picked up from the stock and payment is done for what was used. The vendor takes care of refilling goods if they run low. The stock is always there for the customer and is generally picked up as blocks.
Well these are the types of procurement that exists in SCM. This is a bird’s eye view of SCM processes. In the next set of blogs I will speak in depth about SCM functionality in the system