Part 1: Procurement

DPR105: MGMT INFO SYSTEMS

Instructor: Tom Matys Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 1

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Lesson Goals / Agenda

•  Procurement in ERP

•  SCM (Supply Chain Management)

•  SCM’s vs. Procurement

•  Why timing is critical to Procurement

•  Raw material versus finished product

•  Procurement Business functions & Processes

•  Document Flow

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Procurement

You are here

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Procurement is the process of getting the goods and/or services your

company needs to fulfill its business model.

Buying/Purchasing

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…..is a subset, or one of many responsibilities faced within the procurement process/cycle.

…..it includes all the activities that must take place to get the right product into the right consumer’s hands in the right quantity and at the right time.

SCM Operational activity

Understanding the difference between……

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Raw material

Finished Product

The Traditional Supply Chain

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*Inherent time lags in the chain cause problems

SCM (Supply Chain Management

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Lead Time: The time between when a raw material is ordered and when it is goods receipt at the receiving dock.

*Any lag times in the chain causes issues

Create Purchase Order

Goods Receipt

Lead Time

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The Basic Procurement Process

ç cross functionality è

ç Document flow è

Document flow (Audit Trail)

1. Purchase Requisition (optional)

2. Purchase Order

3. Packing List

4. Goods Receipt Document

5. Vender Invoice

6. Send Payment

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PROCESS

Function

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PROCESS

Function

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PROCESS

Function

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PROCESS

Function

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PROCESS

Function

B2B

The financial terms, agreement, and/or contract between a buying company and a vendor.

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PROCESS

Function

Financial Impact �  Income Statement

Revenue from sales Cost of goods sold Net Income

�  Balance Sheet

Assets Liabilities Equity

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Revenue

For a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period. It also includes all net sales, exchange of assets; interest and any other increase in owner's equity and is calculated before any expenses are subtracted.

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Financial Impact on balance sheet and income statements Example: Procure $500 in materials.

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Process step B/S I/S

Purchase requisition

Purchase order

Goods receipt

Vendor Invoice receipt

Vendor payment

Thinking in terms of the positive and negative financial events in a company during any process.

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Process step B/S I/S

Purchase requisition

Purchase order

Goods receipt Inventory

Vendor Invoice receipt

Accounts Payable

Vendor payment (Cash)

Financial Impact on balance sheet and income statements Example: Procure $500 in materials.

Things to know

� What are the Procurement steps?

� What is the purpose of each step?

� Who is involved in each step?

� What is the document flow?

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Questions

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