Purchase Orders


Purchase orders for material items define scheduled receipts and provide one means to coordinate supply chain activities. Purchase order variations reflect outside operations and sales orders for drop-shipments and special orders. A line type defines other variations such as special charges.

The structure and life cycle of a purchase order serve as the starting points for further explanation. This section focuses on purchase orders for material items and highlights additional considerations such as order- related text and purchasing lead-time .

Purchase Order Structure and Life Cycle

The basic structure of a purchase order consists of header and line item information. As a reflection of this basic structure, the purchase order number and line number uniquely identify a scheduled receipt. The purchase order header identifies the buy-from vendor, which provides the basis for default values in other header fields such as pay-to vendor. The header information subsequently provides default values for line items, such as the planned delivery date. Summary information includes calculated order totals and a discount amount.

The life cycle of a purchase order consists of several steps, with two steps represented by an order status as explained below.

  • Open . An open status indicates the purchase order is being created. The order header has been created, and one or more line items can be defined. Information can be changed on an open purchase order and a purchase order printed, but items cannot be received until the status is changed to released.

  • Released. A released status indicates the purchase order information has been completely entered and authorizes receipt for all line items. Information cannot be changed on a released purchase order, but it can be manually reopened to allow changes. A released order allows receipt transactions and generation of receipt documents for warehouse management purposes.

A line item is automatically flagged as completely received when the received quantity equals the order quantity. This represents an implied closure, and receipts cannot exceed the order quantity. The order is automatically deleted when order quantities for all line items have been posted as completely received and invoiced. Historical information about a system-deleted purchase order can be viewed on the screens for posted receipts and posted invoices. A purchase order can be archived prior to deletion for data retention purposes, or for storing versions of a purchase order prior to changes.

There are several variations of a purchase order line, but each variation goes through the same life cycle statuses.

Purchase Order Variations for Material Items

Material items represent one type of purchase with an explicit designation of item as the purchase order line type. Material items can be designated for drop shipment and special order items that are linked to a sales order. Other variations include a kit of material items and an outside operation for a production order.

Special Order for Purchased Material The purchase of a special order item stems from a sales order line item designated as a special order. Suggested requisitions for the same special order item can be combined or kept separate, based on a purchasing setup policy.

Drop Shipment for Purchased Material The purchase of a dropshipment item stems from a sales order line item designated as a drop shipment. The ship-to address information in the purchase order header comes from the sales order.

Kit of Material Items A kit item is defined on the item master with an assembly list of components. A kit item can be priced, purchased, and received as a complete item. Alternatively, the purchase order line for a kit item can be exploded so that the kit s components are displayed as line items. This means the kit s components are priced, purchased, and received independently.

Outside Operation for a Production Order The purchase order line item for an outside operation identifies the parent item and additional information about the released production order. The additional information includes the production order number and line number, and the operation number, operation description, and external work center defined in the order-dependent routing. The purchase order is created using the subcontracting worksheet. A receipt transaction transfers the purchase costs directly to the production order.

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Other Types of Purchase Order Line Items

A purchase order for a material item represents one type of line item. Other line types can be designated, such as G/L charges, special charges, line item text, and fixed asset.

Line Item Text Line item text can be manually entered as a description, or selected from a list of predefined standard text (identified by standard text codes). Multiple lines of line item text can be entered. The user can optionally override the description for the predefined standard text.

G/L Charges A purchase order line for a G/L account typically represents a non-inventoried expense item such as office supplies or professional services. It can also represent special charges that are not assigned to line items.

Item Charges A purchase order line for an item charge code typically represents freight, landed costs, setup fees, a restocking charge, or other special charges. An item charge code must be predefined and associated with relevant G/L account numbers such as a purchase account. The amount of the item charges must be assigned to one or more purchase order line items in support of actual costing methods . Item charges can be manually or automatically assigned to other line items, with automatic assignment based on equal amounts per line or the proportionate value per line.

Fixed Asset A fixed asset purchase can represent the acquisition or maintenance of a fixed asset, where the line item indicates the fixed asset identifier. Additional information must be indicated on the purchase order line item for an acquisition, and the receipt transaction updates information in the fixed assets application.

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Purchase Order Considerations

The basic purchase order information defines a vendor, item, quantity, purchase price, planned receipt date, and ship-to location. Many situations require additional considerations, such as pricing and discounting, the use of textual explanations , vendor item numbers, and so forth.

Pricing and Discounting on a Purchase Order The purchase price on a purchase order line represents the item s direct material cost per unit. A discount percentage or amount can be optionally specified for the line item, as well as a discount (or service charge) related to the total order. The item s purchase price and line discount can be manually entered, although the price initially defaults to the value of the item s last direct cost. The manual assignment typically applies to items purchased on a one-time or infrequent basis, such as special orders for non-stock items.

The automatic assignment of a purchase price and discount information reflects previously defined agreements with vendors. For example, purchase quotes or reverse auctions may be defined for a one-time purchase or a new item. Approved vendors and vendor agreement information are typically defined for more frequently purchased material, or a blanket purchase order can be used.

These approaches to sourcing and agreement information, and automatic pricing and discounting on purchase orders, are further explained in the next section.

Order-Related Text Order-related text can be specified in three ways: as comments in the order header, as line item text, and as extended text carried forward from the item master.

  • Comments. An order-related comment can be defined with multiple lines of free-form text. Each line can be assigned a user-defined code to sort and filter comments, such as filtering comments related to receiving or handling. Several policies determine whether comments will carry forward to related purchase documents. For example, the setup policies determine whether order-related comments are carried forward from a blanket order to purchase orders, and from a purchase order to invoices and receipts.

  • Line Item Text . Line item text can be manually entered as a description, or selected from list of predefined standard text and optionally overridden.

  • Carry Forward of Item-Related Extended Text. Extended text for an item can be selectively designated whether it will carry forward to purchase documents such as the purchase order and invoice. An item s extended text can be automatically added to purchase order line items (based on the item s policy) or a manual request to insert extended text on a line item can be made. The system considers the effectivity dates specified for the extended text. The extended text description can be overridden on the document.

Using Item Numbers vs. Cross-Reference Numbers A purchase order line item for material can identify the item number or a cross-reference number that represents the vendor item number or a catalog number.

Receipt Dates and Dock-to-Stock Handling Each purchase order line identifies a planned receipt date (when material should arrive on the receiving dock) and an expected receipt date (when material will be available in stock after safety lead-time and inbound warehouse handling time). These are sometimes referred to as the dock date and the stock date. Each line also has an order date when the order should be placed based on lead-time. Figure 6.1 illustrates these three dates and the time period segments. The inbound warehouse handling time reflects the number of days to put away received material; it is defined by location. An item s safety lead-time represents an inspection lead-time or quarantine period expressed in days; it also represents a buffer against late deliveries from vendors. Planning calculations use the expected receipt date into stock as the basis for a scheduled receipt.

Each purchase order line also has a promised and requested receipt date that provides the basis for measuring on-time delivery by vendors. The dates specified in the order header (for promised, requested, and planned receipt dates) act as default values for each line item, and provide a means for mass updates of all line item receipt dates.

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Figure 6.1: Critical Dates for a Purchase Order

Purchase Lead-Time An item s purchase lead-time represents the notification period to place a purchase order and receive the item. It can be expressed in calendar days or working days (or weeks or months) and defined in three places ”for the item, the vendor, or the vendor item ”that provide increasing detail about lead-time. Planning calculations use the most detailed information available about an item s purchase lead-time.

Using a Template to Create Line Items A short-cut approach for creating multiple line items involves a template, which is termed a standard purchase code . A template typically represents repeat orders although it may serve other creative purposes, such as viewing a group of related items that need to be purchased together. Various items can be grouped together; for example, to represent a matched set of components that stem from a vendor s production process, such as a molding or cutting operation. Various G/L account purchases can be grouped together as a template, such as a monthly breakdown of various contract cleaning and maintenance services.

Each template has a user-defined identifier, and defines a list of items and quantities. A template must be assigned to an individual vendor before usage. A template can be viewed and selected during purchase order entry, where selection automatically creates additional purchase order line items for the template s items and quantities. Templates can also be created on the fly during purchase order entry.

Reserving the Scheduled Receipt for a Sales Order The scheduled receipt for a purchase order line item can be reserved for a sales order. This approach to a reservation avoids waiting until material has been received into inventory.

Creating a Purchase Order via Copying an Existing Purchase Document The copy feature can be used to create purchase order line items or the entire order from an existing purchase document, such as another purchase order, quote, return order, or posted invoice. When copying only the line items, the system incrementally adds new line items with the same item, quantity, and ship-to location, and optionally recalculates prices and discounts based on the vendor and date. The incremental additions allow multiple copy efforts, and the system assigns a planned receipt date based on header information. Copying an entire document with its header information replaces the vendor and other header information, and also deletes existing lines.

Generating a Credit Memo or Return Order from a Purchase Order Some situations require identification of items that must be returned or credited while a user is in the midst of purchase order entry. These items can be identified as purchase order line items with a negative quantity. The user can then choose whether to create a return order or a credit memo for the designated line items, and the designated lines are deleted from the purchase order.

Changing the Vendor on a Purchase Order Changing the buyfrom vendor for a purchase order (prior to ledger entries) has several impacts. The change results in new header information and an optional change for the pay-to vendor. Any existing line items are deleted and re-added with the applicable price and discount information, and the default ship-to location associated with the vendor.

Component Forecast Consumption by Purchase Orders A purchase order line for a material item consumes the item s production forecast (if specified) to avoid doubled -up requirements. The line item s planned receipt date dictates forecast consumption logic within an implied forecast period. Note that a purchase order related to a blanket order consumes the blanket order quantity rather than a component forecast.

Sending a Purchase Order A purchase order can be printed or faxed, printed to file and attached to an e-mail message, or sent via a Biztalk outbound document. An agreement concerning the Biztalk outbound document must be previously defined for the vendor; the system provides a warning when an agreement does not exist.

Handling Purchase Order Confirmations An inbound Biztalk document for a purchase order confirmation can modify an existing purchase order, with a designated user notified via e-mail upon document receipt. The information includes the quantity, price, and receipt date for purchase order line items. Rules governing the inbound documents include manual versus automatic acceptance of the information. Another rule determines whether to automatically adjust information (such as quantity, price, and date) on the existing purchase order or to prompt for confirmation during manual acceptance.

Statistics for Purchase Orders An order s statistics include calculated totals for costs, a calculated invoice discount that can be manually overridden, and calculated totals for quantity, volume, net weight, and gross weight. The statistics window also displays calculated tax amounts segmented by tax identifier.




Managing Your Supply Chain Using Microsoft Navision
Managing Your Supply Chain Using Microsoft Navision
ISBN: 0071435247
EAN: 2147483647
Year: 2003
Pages: 71

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