Central Procurement in M3 BE
The central purchasing department is responsible for planning and management of purchasing activities for warehouses in different facilities. With the central procurement process, you can create central purchase orders for a purchase organization with purchase order lines for warehouses across facilities, while the purchase order is assigned and managed by the central purchasing department. With the central purchase order, you can direct the deliveries from the vendors to the demanding warehouse without going through a distribution center. Ownership and receipt of goods takes place at the demanding warehouses whilst the supplier invoice is sent to the central purchasing department. In the central procurement process, the central purchasing department is considered as providing a service for the warehouses in the organization. There is no intention to do any internal billing between the buying and receiving parties.
With this process, central buyers get a better visibility and overview of aggregated requirements, can drive relationships with preferred vendors and have the ability to create larger consolidated purchase orders that in the end can benefit from saved costs and quantity discounts.
The central procurement process should not be confused with distribution center procurement, where ownership of goods takes place before repackaging and distribution to demanding warehouses. In such a process, a distribution order or internal sales order can be used to distribute goods between a buying and selling parties and can be configured for internal billing.
Prerequisite
'Use of purchase organization for planning' must be activated for the company on 'Purchase – Settings' (CRS780/H).
Purchase organizations in central procurement
Purchase organizations are created in 'Purchase Organization. Open' (PPS099) and used for enabling central procurement in M3 BE purchasing. Purchase organizations in the central procurement process are used to simplify the planning of purchase requirements for central buyers and for consolidation of planned purchase orders for requirements across facilities.
Purchase organization for planning
Purchase organizations can be assigned to a 'Buying facility' in (PPS099). The buying facility represents the facility of the central purchase department. Planned purchase orders that are assigned to a purchase organization connected to 'Buying facility', will get the facility from the purchase organization. Then, planned purchase proposal or purchase orders panels can be set up and sorted with better aggregations such as supplier, facility, and purchase organization. This gives central buyers a better overview of all planned purchase orders for warehouses and products, that will be centrally purchased and should be consolidated.
Purchase organization for consolidation
'Purchase organization' is a mandatory consolidation object in 'PO Consolidation Group. Open' (PPS019) in the central procurement process. Planned purchase orders for warehouses within a division, that are assigned to the same purchase organization, can be consolidated to create purchase orders with purchase order lines on multiple facilities. The purchase order header on such consolidated orders is created on the facility of the central purchase department, that is the 'Buying facility' from the purchase organization.
One central purchasing department can manage multiple purchase organizations. In such a way, purchase organizations can be used as a level of consolidation that is lower than central purchase department but higher than warehouse or facility. This is useful, when a central purchase department is responsible for purchasing activities for a country, but PO consolidation must be split for different regions, for example the southern, northern, western, eastern regions. Separate purchase organizations can be created for each region, but for the same buying facility. This way separate PO can be created for each region, yet with the same buying facility as the facility of the purchase order head.