This post provides general information about purchase order and how they are processed with Material Management (MM) Purchasing. The purchase order defines a formal request or instruction from purchasing organization to vendor or a plant to supply certain quantity of goods or services by certain point in time.
What is a purchase order?
The purchase order represents the formal and final approval of a purchasing transaction with the vendor. It identifies the below
- the vendor
- the material or service to be ordered
- the quantity
- the price
- the delivery date and terms of delivery
- the terms of payment
In addition, the purchase order determines whether the ordered material is placed in stock or consumed directly upon goods receipt. Purchase orders can be subject to a release procedure.
Structure of a purchase order
As in the case of other purchasing documents, the PO consists of:
- header, It containing information specific to the entire PO. For example, the terms of payment and the delivery terms are in the header.
- tems, It containing information specific to the material or service. For example:
- material number or short description (“short text”)
For each item, you can enter additional information such as time-spot schedule lines and item-specific texts. The PO history menu enables you to monitor deliveries and invoices received with regard to the item.
Also See: Release Procedure for Purchase Requisition in SAP MM?
The item category defines whether a purchase order item:
- requires a material number
- requires an account assignment
- will be placed in stock
- requires a goods receipt (GR) and/or an invoice receipt (IR)
The following are the item categories defined in the standard system:
Standard items categories in POs
Standard, It provides for normal goods and invoice receipt
- material number required- no account assignments
- kept in stock
- GR necessary
- IR not necessary
- material number required
- GR necessary
- no IR
- account assignment required
- GR and IR allowed
Items with the item category “Standard” are orders for goods that are to be procured externally. In this case, goods and invoice receipt are possible.
Items with the item category “Consignment” are items relating to goods procured on a consignment basis. Account assignments cannot be made for material ordered on consignment. Consignment stocks are managed separately and are not valuated.
Order items with the item category Subcontracting are used to order finished assemblies from a subcontractor, for example. Any components the subcontractor requires to assemble the final product are entered as “material to be provided.”
Stock transport order (inter-plant stock transfer order)
The stock transport order is a mechanism facilitating the transfer of stock from one plant to another (that is, a transfer involving transport over a longer distance). The stock transport order is one of the special order types in Purchasing.
Part of a triangular business deal. A third-party order is an order placed with a vendor instructing the latter to supply goods to or perform a service for a third party (for example, one of your customers). The third-party order is specified in the item category field of a requisition or purchase order. The third-party order is one of the special order types in Purchasing.
Item category and account assignment
The item category requires an account assignment for materials that are consumed directly (that is, materials that are not taken into stock). In the case of stock material, an account assignment is possible, but not mandatory.
You can enter text in a purchase order directly or change texts that are suggested by the system. There are two kinds of text:
- Header text – applies to the entire document
- Item text – applies to an individual item
You define which texts appear in which order on printouts in Customizing. You can enter several header or item texts, which you can identify by your own codes.
Also See: How to create purchase order in sap using me21n
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