Procurement Process

Procurement Cycle

Procurement Cycle has the following steps.

1. Determinations of Requirements: (ME51N) In this step Material Requirements are identified which must be procured externally from the user. Purchase Requisition (PR) is created using ME51N t-code.
2. Determination of the source of supply: As a purchaser, we can use determination of the source of supply to create requests for quotation (RFQs) and then enter the quotations. In addition, we can refer to contracts and conditions that already exist in the system.
3. Vendor selection: System selects vendors by making price comparisons between the various quotations.
4. Purchase order handling: (ME21N): In this phase information is acquired from the Requisition and the Quotation. Purchase Orders can be generated by the system or they can be created manually (ME21N). 
5. Purchase order monitoring: We can monitor the processing status of the purchase orders. We can remind the vendors of outstanding deliveries.
6. Goods receipt: (MGIO): We can check whether the delivered goods and quantities match the purchase order. The system also updates the purchase order history of the purchase order. The goods receipts number can be obtained by entering the Purchase Order number. 
7. Invoice verification (MIRO): The availability of the purchase order and goods receipt data enables you to refer to the quantity and price variances. The vendor invoices are checked for accuracy of the arithmetic and the contents.
8. Payment processing: The vendor payment is usually made in Financial Accounting. 

Basics of Procurement: Purchase Order