Basic Procurement Activities

A brief introduction of Procurement activities is given below:

Procurement Activities	Description
Determination of requirement	It is the logical subdivision where it is determined that what material or services are required to company, and which supplier can fulfill the requirement.
Creating Purchase Requisition	It is the phase in which purchasing department is informed about the requirement of items or services required for business purpose. A requisition is a internal document.
Creating Purchase Order	It is the phase when order is created from requisition and it is approved and assigned to a supplier.
Goods receipt/ Invoice Received	It is the phase in which the material is received by the company and the condition and quality are verified. In this phase Invoice is received from the vendor (seller).
Invoice verification/ Vendor Payment	It is the phase in which the vendor (seller) is paid from the company and reconciliation of the invoice and PO is accomplished.

Type of Basic Procurement

There are 2 types of Basic procurement which are shown below:

The following points show the difference of Procurement for Stock vs. Consumption:

Procurement for Stock - A stock material is a material that is kept in stock. These materials are kept in stock once received from the vendor. The stock of this material keeps on increasing or decreasing based on amount of the quantity received or issued. To order a material for stock, the material must have a master record within the system.
Procurement for Direct Consumption - When procurement is for direct consumption i.e. it will be consumed as soon as it is received, the user should specify the consumption purpose. To order a material for consumption, the material may have a master record within the system.

The following points show the difference of External vs Internal Procurement:

External procurement - It is the process of procuring goods or services from external vendors. There are 3 basic forms of external procurement generally supported by the Purchasing component of IT system.
One time orders are generally used for material and services that are ordered irregularly.
Longer-term contracts with the subsequent issue of release orders - For materials that are being ordered regularly and in large quantities, we can negotiate deal with the vendor (seller) for pricing or conditions & record then in a contract. In a contract you also specify the validity date.
Longer-term scheduling agreements and delivery schedules - If a material is ordered on an everyday basis and is to be delivered according to an exact time schedule, then you set up a scheduling agreement.
Internal Procurement - Large corporate organizations may own multiple separate businesses or companies. Internal Procurement is process of getting material and services from among identical company. So, each of these companies maintains a complete bookkeeping system with separate Balance, Profit & Loss Statements so that when trade occurs between them it will be recorded.

Serkan AKKAVAK
Computer Engineer
ABAP Developer & SAP MM SD Consultant
Contact : serkurumsal@yandex.com