Purchase Organizations

Purchase organization

A purchase organization is an organizational level, that helps to subdivide purchase planning and pricing processes in organizations. Purchase organizations can be used for creating and managing centrally or regionally negotiated purchase price agreements for which prices and conditions should be available for a selected group of warehouses.

Purchase organizations are also used in the central procurement process to assign the responsibility of purchase planning for selected warehouses to a central purchase organization. The use of purchase organizations makes it possible to consolidate planned purchase orders for a purchase organization, even for planned purchase orders in warehouses that belong to different facilities.

Purchase organizations are defined in 'Purchase Organization. Open' (PPS099). The purchase organization type determines the use of the purchase organization for purchase pricing or purchase planning.

Purchase organizations for pricing

Purchase organizations of type 0='Price' defines which warehouses enable the use of prices and conditions of specific purchase agreements. This is achieved by connecting price purchase organizations to warehouses and purchase agreements. The purchase organization to which a warehouse is connected will be used to search for a valid agreement in a purchase price search. Prices from the agreement connected to the purchase organization of the warehouse will be selected as the first priority in the price origin search.

Purchase organizations for planning

Purchase organization of type 1='Planning' are used to enable central procurement. The responsibility for procurement activities can be assigned to a central purchasing department which should buy goods for groups of warehouses (regions) or products.

The use of purchase organization for planning affects consolidation of the planned purchase orders. It also determines for which warehouses PO lines can be created on a purchase order. This is achieved by defining for which warehouses a purchase organization can buy, assigning purchase organizations to planned purchase orders based on various objects, and consolidating planned purchase orders using the purchase organization as a consolidation object.

Purchase organizations for planning can be defined for central purchasing by assigning it to 'Buying facility', which represents the central purchasing department. The 'Buying facility' of a purchase organization becomes the facility of the planned purchase orders and purchase orders managed by a central purchasing organization. In such a way, larger consolidated purchase orders can be created for warehouses across the facilities.

Purchase organizations for pricing vs. planning

Purchase organizations for purchase price agreements can be used independently of the use of purchase organizations for planning purposes, and vice versa.