Vendor selection is an important process in procurement cycle. Vendors can be selected by quotation process. Once vendors are short-listed by organization, it enters into agreement with a certain vendor to supply certain items with certain conditions and typically when agreement is reached a formal contract is signed with the vendor. So, outline agreement is a long term purchasing agreement with vendor. The key points about outline agreement are as follows:
  • Outline agreement is a long term purchasing agreement with vendor containing terms and conditions regarding the material that is supplied by vendor.
  • Outline agreement are valid up to certain period of time and cover a certain predefined quantity or value.
Outline agreement is of following two types.
  • Contract
  • Scheduling Agreement

Contract

Contract is a long term outline agreement between vendor and ordering party over predefined material or services over certain framework of time. There are two types of contract:
Quantity Contract: In this type of contract overall value is specified in terms of total quantity of material to be supplied by vendor.
Value Contract: In this type of contract overall value is specified in terms of total amount to be paid for that material to the vendor.
Contract can be created by following the below steps:
Path to create Contract:
Logistics => Materials Management => Purchasing => Outline Agreement => Contract => Create
TCode: ME31K



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