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Once a requisition is created, the company must select a source of sup-
ply. This source can be either external (e.g., a suitable vendor) or internal
(e.g., another plant in the company). If the source is external, then the selec-
tion process may include additional steps such as requesting and receiving
quotations. After the company receives the quotations, it evaluates them
and selects a vendor. It then submits a purchase order. Upon receiving the
order, the vendor confi rms receipt and may provide additional information
such as the expected shipment date. The vendor then ships the materials to
the company, which receives them into inventory. The vendor also sends an
invoice. Once the company verifi es the invoice, it sends a payment to the
vendor.
If the source of supply is internal, then the process is somewhat differ-
ent. A stock transport order is used instead of a purchase order. We will discuss
stock transport orders in greater detail in the chapter on inventory and ware-
house management.
The preceding paragraphs convey a very simplistic overview of the basic
steps in the procurement process. In reality, procurement is much more com-
plex. In the next section we examine the steps illustrated in Figure 4-12 in
detail. We discuss each step in terms of its key elements— triggers, data, tasks,
and outcomes. A trigger is something that causes the step to be executed. The
relevant data typically include organizational data, master data, transaction
data, and user input that are specifi c to the process step. Outcomes include
new transaction data and updates to master data, all of which are stored in
the database. In addition, fi nancial accounting (FI) documents, management
accounting or controlling (CO) documents, and material documents are cre-
ated. Finally, transaction documents are created or updated.

REQUIREMENTS DETERMINATION
The elements of the requirements determination step are summarized in
Figure 4-13. Requirements for materials arise from a need that is identifi ed
either automatically by another process or manually by an individual. The pro-
cess that most commonly generates requirements is the materials planning
process. (We will discuss this process at length in the materials planning chap-
ter.) Requirements are also generated by the production and plant mainte-
nance processes. To complete these processes, the company sometimes must
purchase non-stock items or services from another organization. In such cases
a requirement for the material or service is created. In addition, the need to
send materials for external processing during production (e.g., a part to be
repaired) will result in a requirement for a subcontracted item.

Figure 4-13: Elements of the requirements determination step

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