The document discusses the procurement process and its key aspects. It begins by defining procurement as the process of obtaining the goods and services a company needs. It then distinguishes procurement from supply chain management (SCM), noting that procurement is a subset of SCM. The document outlines the basic steps in the procurement process, including purchase requisition, purchase order, packing list, goods receipt, vendor invoice, and payment. It discusses the cross-functional nature and document flow. It also explains how procurement impacts financial statements through changes to the income statement and balance sheet.

1. Part 1: Procurement
DPR105: MGMT INFO SYSTEMS
Instructor: Tom MatysMagal and Word ! Essentials of Business Processes and
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Lesson Goals / Agenda
• Procurement in ERP
• SCM (Supply Chain Management)
• SCM’s vs. Procurement
• Why timing is critical to Procurement
• Raw material versus finished product
• Procurement Business functions & Processes
• Document Flow

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Information Systems | © 2009 3
Procurement
You arehere

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Information Systems | © 2009 4
Procurement is the process of getting
the goods and/or services your
company needs to fulfill its business
model.
Buying/Purchasing

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…..is a subset, or one of many
responsibilities faced within the
procurement process/cycle.
…..it includes all the activities that must take
place to get the right product into the right
consumer’s hands in the right quantity and at
the right time.
SCM Operational activity

6. Understanding the difference between……
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Raw material
Finished Product

7. The Traditional Supply
Chain
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*Inherent time lags in the chain cause problems
SCM (Supply Chain Management

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Lead Time:
The time between when a raw material
is ordered and when it is goods receipt
at the receiving dock.
*Any lag times in the chain causes issues
Create Purchase
Order
Goods
Receipt
Lead
Time

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The Basic Procurement Process
ç cross functionality è
ç Document flow è

10. Document flow (Audit Trail)
1. Purchase Requisition (optional)
2. Purchase Order
3. Packing List
4. Goods Receipt Document
5. Vender Invoice
6. Send Payment
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PROCESS
Function

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PROCESS
Function

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PROCESS
Function

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PROCESS
Function

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PROCESS
Function

16. B2B
The financial terms, agreement, and/
or contract between a buying company
and a vendor.
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PROCESS
Function

18. Financial Impact
— Income Statement
Revenue from sales
Cost of goods sold
Net Income
— Balance Sheet
Assets
Liabilities
Equity
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19. Revenue
For a company, this is the total amount of
money received by the company for goods sold
or services provided during a certain time
period. It also includes all net sales, exchange of
assets; interest and any other increase in owner's
equity and is calculated before any expenses are
subtracted.
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20. Financial Impact on balance sheet and income statements
Example: Procure $500 in materials.
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Process step B/S I/S
Purchase
requisition
Purchase order
Goods receipt
Vendor Invoice
receipt
Vendor payment
Thinking in terms of the positive and negative
financial events in a company during any process.

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Process step B/S I/S
Purchase requisition
Purchase order
Goods receipt Inventory
Vendor Invoice
receipt
Accounts Payable
Vendor payment (Cash)
Financial Impact on balance sheet and income statements
Example: Procure $500 in materials.

22. Things to know
— What are the Procurement steps?
— What is the purpose of each step?
— Who is involved in each step?
— What is the document flow?
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23. Questions
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