In my last post i discussed about integration of SAP modules. In this post, we will discuss what SAP materials management module is all about.
Any organization needs to procure goods and services. Goods and services can be procured using various procuring instruments like purchase orders (PO), contracts, request for quotation (RFQ), scheduling agreements etc. The organization creates these procurement documents and sends it to vendors. Vendors in turn ship goods or perform service. Later the vendors present invoice for the goods or services performed. The organization in turn verifies the invoices and processes them against the goods received or services performed. The finance department of the organization then pays to the vendors against the invoice receipt.
But even before these procurement documents are created, various departments of the organization need to demonstrate what goods or services need to be procured. A purchase requisition (PR) or indent is created by these departments for this purpose. The PRs can be created automatically or manually. Automatic creation of PR can be done using material requirement planning (MRP) tools.
Once the user departments create PRs, they are sent to the purchasing department. The purchasing department then finds out which kind of procurement document needs to be created for procuring the required goods or services. It depends on the situation on hand. If it is a one time purchase then a single PO can handle the purchasing. If a long term purchasing is required then a long term contract can be established with a vendor. If the required goods or services needs to be purchased using competitive bids from vendors then a RFQ will be created.
In my next post, I will elaborate on how RFQ process is mapped in SAP.