Creating a vendor agreement

Vendor agreements contain information that pertains to every line of an agreement you establish with a vendor for a particular set of items. You can define five kinds of vendor agreements: contract, blanket, catalog, standing, or service. You also can commit funds when you add an agreement. Use the following procedure to define vendor agreements.

Before you can create a vendor agreement, you must define the vendors that supply the items you buy.

To create a vendor agreement

  1. Access Vendor Agreement (PO25.1).
  2. In the Origin field, the application indicates where the vendor agreement originated (in the Purchase Order application or the Contract Management application). Be aware that agreements created in Contract Management cannot be updated here.
  3. Select the Header tab to add header information. Use the following guidelines to enter field values.
    Vendor, Purch From

    Type the vendor's identification code.

    Description

    Type a description for the vendor agreement.

    Effective Date

    Represents the date that the vendor agreement is first valid (the date that it becomes effective).

    Expiration Date

    Represents the date that the vendor agreement is last valid (the date it expires).

    Last Invoice Allowed Date

    Type the date that allows invoices to be added in Accounts Payable after the Expiration Date and up to the Last Invoice Allowed Date, but should not be before the Effective Date. Last Invoice Allowed Date can be changed.

    Review Date

    Type the Review Date, which occurs before the Expiration Date and/or Last Invoice Allowed Date. No other invoices can be entered after the review date. Likewise, prices do not default to any purchase orders or requisitions after this date.

    Agreement Administrator

    Identifies a contact person for this vendor agreement.

    You must have previously defined the agreement administrator using PO Contacts (PO07.1).

    Currency Code

    Type or select the currency code that is used from this Vendor Agreement. If left blank, this field defaults to the company base currency code established in Company (GL10.1 ).

    Per Order Minimum Amount

    Type the minimum amount allowed to be ordered on this vendor agreement.

    Per Order Maximum Amount

    Type the maximum amount allowed to be ordered on this vendor agreement.

    Lifetime Maximum Amount

    Type the lifetime total amount that is allowed to be ordered on this vendor agreement.

    Lifetime Maximum Edit

    Select whether the lifetime maximum edits is applied to purchase orders or to purchase orders and requisitions.

    Dual Source Agreement

    Type the reference for the dual source agreement.

    UOMs Must Match

    Select whether the vendor agreement unit of measure must match that on the requisition or purchase order (for the price to default from the agreement). To use this feature, you must select Yes in the Use Agreement UOM field.

    Use Agreement UOM

    Select Yes so that the vendor agreement unit of measure defaults to the requisition or purchase order. When an item's cost depends on a specific unit of measure when ordering from a vendor, this feature helps to achieve that control.

    Note: For more information, see the Knowledge Base article.
    Notification Percent

    Type a percentage amount so that when the amount ordered on the vendor agreement, when divided by the Per Order Maximum Amount, is equal to or greater than the percentage you enter in this field, a message is sent to the agreement administrator.

    Note: To use this feature, you must also Type an amount in the Per Order Maximum Amount field and select a valid agreement administrator in the Agreement Administrator field.
  4. Select the Header Defaults tab to enter header information for an agreement. Use the following guidelines to enter field values.
    Manufacturer Code/Division

    Select the manufacturer's code, division, and description to identify who manufactured the item. You set up manufacturer's codes using Manufacturer Code (IC14.1).

    Accounting Unit

    This field contains the header default accounting unit that is used in defaulting of accounting unit into POVADIST.

    Account

    Select the general ledger account and subaccount for the vendor agreement item.

    Post to Company

    This field contains the header default post to company (also known as the distribution company) that is used in the defaulting of company onto POVADIST.

    Taxable Flag

    Select whether the item is taxable or tax exempt.

    Tax Code

    If the item is taxable, assign a valid tax code to it. You set up tax codes using Tax Code Master (TX01.1).

    Include Add On Costs

    Select yes to include AOC in the min, max, and Lifetime max calculations.

    Include Tax

    Select yes to include AOC in the min, max, and Lifetime max calculations.

    Item Create Flag

    Select how a Lawson item number should be created.

    Note: The value you entered in the Vendor Agreement Def Item Create Flag field on Corporate Item Group (IC00.1) defaults here.

    To change the default for the creation of a new item number, select one of the following values:

    • Sequential: Creates an item number by adding one to the last sequential item number that was used.

    • Assign: Creates an item number as the vendor item number, manufacturing item number, UPC, SKU, UPN, NDC, or GTIN.

    • Manual: You assign the item number manually.

    Item Assign Field

    If the Item Create Flag is set to Assign, you must select the identifier that you want to assign to the item number.

  5. To define header information for contracts, blankets, or standing agreements, select the Header Type Specific tab. Use the following guidelines to enter field values.
    Group Purchasing Organization

    Identifies the group purchasing organization that negotiated the vendor agreement.

    Stockless Flag

    Select whether you want this agreement used for specific locations for pricing.

    Rebate

    Select whether all lines are eligible for rebates.

    If the Rebate field is set to Yes for any of the vendor agreement lines, the Rebate field on the header cannot be set to Yes.

    Rebate Percent

    Type the rebate percentage to apply to purchases using this vendor agreement.

    You must select Yes in the Rebate field to be able to type a rebate percentage.

    Schedule Frequency

    Select how often you want to receive items: weekly, biweekly, monthly, or quarterly.

    Note: The Schedule Frequency field is required when you create standing agreements.
    Maximum Release Number

    Type the number of standing orders that will be released during the release schedule.

    Note: You cannot define the duration of the agreement by the number of releases if multiple companies, defined on Vendor Agreement Participants (PO25.3), are associated with the agreement. You can use the Expiration Date field to select a date by which the vendor agreement expires.
  6. To commit funds to activities or accounts/accounting units before a requisition or purchase order has been created, select the Commitments tab. Use the following guidelines to enter field values.
    Create AC Commitments

    This field determines whether funds are committed to a specific activity when an agreement is released. It also indicates if the commitment is a header commitment or a line commitment or if there are no commitments at all.

    Note: If you select header commitment or line commitment, the commitment is updated in the Project Accounting application. See the Project Accounting User Guide.
    Create GL Commitments

    This field determines whether funds are committed to a specific general ledger account/accounting unit when an agreement is released. It also indicates if the commitment is a header commitment or a line commitment or if there are no commitments at all.

    Note: If you select header commitment or line commitment, the commitment is updated in the General Ledger application. See the General Ledger User Guide.
    Commitment Company

    You must select the company to create agreement header commitments for.

    Commitment Accounting Unit

    If you create an agreement header commitment, you must select an accounting unit for which to create the commitment.

    Commitment Account

    If you create an agreement header commitment, you must select an account for which to create the commitment.

    Commitment Activity

    If you create an agreement header commitment, you must select an activity for which to create the commitment.

    Requisition Commitment Amount

    This field displays the requisition commitment amount.

    Note: The requisition commitment is relieved when the purchase order is released.
    Close Commitment

    This field will be blank until the committed agreement is closed.

  7. Add the vendor agreement.
  8. Add line items to the vendor agreement.

    To add lines for contract, catalog, blanket, or standing agreements, click the Lines button to access Vendor Agreement Line (PO25.6). To indicate that a contract line is eligible for a rebate (or what rebate percentage to apply), click the More button on the Line Detail tab.

    – or –

    To add lines for service agreements, click the Service Lines button to access Service Agreement Line (PO25.7).

    Note: You can add a distribution code to a blanket or standing order or service agreement. Distribution codes are defined using Distribution Code (AP05.3).
  9. To add additional pricing information, such as future price markups or discounts, click the Pricing button to access Agreement Pricing (PO25.2).

    – or –

    Transfer to Agreement Pricing (PO25.2).

    Defining agreement pricing

  10. Click the Participants button to access Vendor Agreement Participants (PO25.3) to assign participants to an agreement, including specific companies, locations, requesting locations, or accounting units.

    – or –

    Transfer to Vendor Agreement Participants (PO25.3).

    Defining agreement participants

  11. To add ‘display only' comments to the vendor agreement header, click the Add Comments button using Vendor Agreement (PO25.1).
  12. Select the Release form action to release the vendor agreement.

    Release the agreement only when you have setup the agreement, including multiple distributions and spread commitments. You should release a vendor agreement line before using it on a requisition, purchase order, or in purchase order unit cost defaulting. In effect, you can approve a vendor agreement before it is put into use, and you can add or revise vendor agreements while it is in the unreleased state. Once a vendor agreement is released, it stays in the released state. If you need to change a released agreement, the agreement must re-pass all the release edits.

Related reports and inquiries

To Run
List agreements with agreement end dates or renewal dates that fall within the date range you select Vendor Agreement Renewal Report (PO226)

Print a list of standing orders (standing agreements) created on all sources, on Contract Management only, or entered only agreements.

Note: This reports also lists all the parameters defined for the agreements. You can run a listing for a specific agreement, a specific vendor and/or buyer group or buyer, and/or a specific agreement type (contract, catalog, blanket, standing, or service).
Vendor Agreement Listing (PO225)
Print three types of vendor agreements (service, blanket, and standing orders) Vendor Agreement Format Print (PO229)
Synchronize the item description of agreement lines to the item description on the Item Master file Print Agreement Item Description (PO125)
Print a report showing what percentages of purchases from a vendor were made against the contract Contract Agreement Compliance Report (PO227)
Inquire on items listed on an agreement Agreement Item Lookup (PO28.1)