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84 CHAPTER 4 The Procurement Process

Figure 4-1: A basic procurement process

strategic aspects of this current procurement process, it can then design and
implement a new process that best meets GBI’s needs. It can also determine
the best way to manage this process using the SAP ERP system.
In this chapter we examine the procurement process, also referred to as
the purchasing or requisition-to-pay process. We begin by discussing the orga-
nizational and master data relevant to this process. We then examine some
of the key concepts inherent in the procurement process. After considering
the concepts, we discuss the process steps in greater detail than we did in
Chapter 1. We conclude the chapter with a discussion of reporting options.
To illustrate the various concepts and process steps, we will use the fol-
lowing scenario throughout the chapter. GBI has discovered that the inventory
of t-shirts (SHRT1000) in its Miami distribution center is low. Consequently,
the company must procure more shirts before it runs out and begins to lose
sales (and perhaps customers). GBI procures all of its t-shirts from a company
called Spy Gear. Further, it purchases them in quantities of 500.

ORGANIZATIONAL DATA

The procurement process is executed in the context of specifi c organizational
levels. Organizational levels relevant to the procurement process include cli-
ent, company code, and plant. We discussed these levels in Chapter 2. Recall
from that discussion that a client represents an enterprise that is comprised
of many companies or subsidiaries, each of which is represented by a com-
pany code. Most activities in the procurement process occur within a company
code. Recall also that a plant fulfi lls many functions in a company. In the con-
text of procurement, a plant is the location where the materials are received.
Therefore we refer to it as a receiving plant, as opposed to, say, a manufactur-
ing plant, where goods are actually produced. Three additional organizational
data are relevant to purchasing: storage locations, purchasing organization,
and purchasing group. We consider each one next.

STORAGE LOCATION
Storage locations are places within a plant where materials are kept until
they are needed. A plant can have multiple storage locations, each of which is
designated for different purposes (e.g., staging area, inspection area) or stores

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