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Key Concepts 95

Figure 4-9: Purchasing info record example

Demo 4.3: Review purchasing info record and conditions

KEY CONCEPTS

Before we discuss the procurement process in detail, we pause here to discuss
some key concepts that are essential to understanding how the process works.
These concepts are related to how the materials are purchased (item catego-
ries), how their impact on fi nancials is recorded (account determination), the
materials’ usability (stock type), and the movement of the materials as they are
received, stored, and shipped to customers (goods movements).

ITEM CATEGORIES
Item categories determine which process steps and data are needed when a
company purchases materials or services. Common item categories are stan-
dard, consignment, subcontracting, third-party, stock transfer, and services.
Of these categories, standard items are the most common, and the pro-
cess used to procure them includes the steps portrayed in Figure 4-1. The ini-
tial step is to create a requisition, which is then converted to a purchase order
and sent to a vendor. When the vendor receives the purchase order, it ships the
materials, which the ordering party receives via the goods receipt step. The
ordering party also receives an invoice, and it makes a payment to the vendor.
In contrast, when a company purchases materials on consignment, it pays the
vendor only when it uses or sells the materials. For this category of materials,
therefore, there is no invoice receipt step. Third-party order refers to items

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