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Procurement process includes necessary activities for the external procurement of goods and services. Procurement ensures that all required goods and services are ordered from and delivered by the vendor in sufficient quantities and in satisfactory time.

Procurement types

In the SAP Material management’s procurement process, you procure either for stock, service, and direct consumption. You can determine the purpose for which ordered materials are being procured in the purchase order, for example.

  • Photo copier papers – Direct consumption purchase
  • Service for HVAC system  - Service purchase
  • Raw material for production – Stock purchase

Stock Procurement

A stock material is a material that is kept in stock. Such materials are placed in storage following a goods receipt. Requirements are generated manually or by material requirement planning process. When goods are received by or issued from stores or the warehouse, the stock on hand is increased or reduced by the amount of the quantity received or issued.

When you order a material for stock, the system does not require an account assignment. This is because the posting to the appropriate stock and consumption accounts occurs automatically after each goods movement (for example, after a material is received by the stores or issued from stores). Furthermore, the value and the quantity of the stocked material are updated in the material master record.

To order a material for stock, the material must have a master record with material type that includes Basic data, purchasing data, plant data, accounting data. (e.g. Material type ROH – Raw material)

Service or Direct Consumption procurement

When you procure for direct consumption, you specify the consumption purpose by entering an account assignment (for example, K= cost center, P = Project). On goods receipt, the material or service counts as having been consumed.

If a material is procured for direct consumption, the consumption accounts in Financial Accounting are posted when the goods receipt is entered. The total quantity and value of existing stocks of the material are not affected.

Account Assignment for procurement

For each item of a purchasing document, you specify whether procurement is for stock or for direct consumption. In a purchasing document, you can enter items with or without account assignments.

If you order stock materials, the ordered material must have a material master record.

If you order consumable materials, the ordered material may have a material master record.

Material purchasing history can be tracked and report by material master record.

Account assignments are possible for the following purchasing documents:

  • Purchase requisitions (Internal document)
  • Purchase orders (External document)
  • Outline agreements (External document)

Procurement methods:

Before ordering a material or service from a vendor, you must decide which purchasing method you wish to employ. This section describes the three basic forms of external procurement supported by the SAP MM Purchasing component:

  1. Purchase orders  (PO)
  2. Contracts
  3. Scheduling agreement

Purchase Orders

Tcodes: ME21N/ME22N

This is most common type of procurement method. You use Purchase orders for materials or services that you order on as needed basis.

You can reference a purchase requisition, RFQ, or another PO when creating a purchase order. The vendor’s current conditions for the material are adopted from the purchasing information record when the new PO is created.

Contracts / Outline agreement

Tcodes: ME31K/ME32K

For materials that are ordered regularly and in sufficient quantity, you can negotiate longer-term pricing and conditions with the vendor and record them in a contract. In the contract, you specify its validity period and the total target quantity or total dollar value covered.

When creating a contract, you can reference an RFQ or another contract. The contract requisition (representing a request to set up a longer-term contract) can also simplify the data entry process by serving as a reference document.

When you create the associated release orders, information is adopted from the contract. Individual deliveries are affected on the basis of the release orders, which specify the exact order quantity and the delivery date.

Outline agreement/Scheduling Agreement

Tcodes: ME31L/ME32L

If a material is ordered on a regular basis and is to be delivered according to an exact time schedule, then you set up a scheduling agreement. This method of procurement is typically used when Just-in-Time deliveries are required from the vendor (for example, in the Appliance manufacturing, Computer assembling).

As in the case of the contract, the material and the basic conditions are specified in the scheduling agreement. Once you have set up the agreement, you can create delivery schedules with individual schedule lines specifying exact quantities, delivery dates, and times extending over a certain period into the future.


Procurement requirements and process steps are different for procuring stock, service and direct consumption. Based on your accounting and inventory management requirements, you can decide stock purchase or direct consumption. For example: You stock papers for photo copier but do not manage inventory, so you procure photo copier papers as direct consumption item.

There are three different methods of procurement. Each method provides different degree of monitoring and control. For example you have yearly contract with supplier for supplying 1 million hard drives, but you dictate schedule of delivery based on your production schedule. For this requirement you use procurement method as scheduling agreement.

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