Let's talk about a business process called the "Source to Pay" process or Purchase to Pay process. This is an essential concept that helps businesses and companies manage their purchasing efforts effectively. When a company needs to buy something, this is the process it should follow.
Think of it as a sequence of steps involved in buying any item — whether it's a bike, a phone, or a sweater from your favorite online shopping website — except this process is followed by companies.
Step 1: Determining Requirements: It's just like making a shopping list. The business department identifies what they need and make a list or a purchase requisition. This can be done manually or through an automated process known as the MRP (Materials Requirements Planning) system.
Step 2: Where to Buy and From Whom: Before you buy a product online, you generally compare prices from different websites, right? Similarly, businesses also decide from where they will buy the item. They can refer to past orders, agreements, or digital records.
Step 3: Purchase Order Processing: The business then creates a purchase order, which is a formal document for the seller. This is just like adding an item to your cart and reviewing it before you make the payment. Some data from previous transactions or quotations can also be copied to save time.
Step 4: Purchase Order Monitoring: Like how you track your order after you've bought something, businesses also keep a check on their purchase orders. They can see if the goods or invoice has been received and can also remind the sellers about any pending deliveries.
Step 5: Goods Receipt: When the goods are received, they are entered in the system, and any inconsistencies in goods or quantities are checked. Also, the purchase order history is updated — just like updating your shopping or order history!
Step 6: Invoice Verification: The invoice received from the seller is carefully scrutinized for its accuracy and calculations. It’s just like you checking your bill after you’ve received your order.
Step 7: Payment Processing: Like finalizing your online order by paying through your card or internet banking, businesses also execute a payment program to clear off the payments to the vendor. This is done regularly by the accounting department.
Apart from this, businesses also have to deal with international trade transactions, which involve two software services: Foreign Trade and SAP Global Trade Services (GTS). Goods bought from foreign countries come under this, and this is checked if any third-party foreign trade systems are used.
For material management and inventory management, the Material Ledger is used. Just like you managing your bookshelf, sorting your books, knowing which book is kept where and how many book spaces are empty, businesses manage their materials and inventory. They also keep track of the movements of goods, their prices, and even forecast future valuation.
Lastly, regarding output management, businesses decide on how to handle printed materials, such as invoices, order confirmations, delivery notes, etc. Also, they use SAP S/4HANA Analytics, which allows real-time reporting, making the whole process much more efficient.
In a nutshell, managing procurement effectively is essential for running a successful business. The Source to Pay process, just like your online shopping process, ensures this by systematically organizing every step from identifying the need for a product to paying for them. No step is skipped or overlooked, ensuring efficiency and cost-effectiveness.
It's like your online shopping but think of it on a much, much larger scale and with a lot more data to handle. Next time you place an order online, know that you are, in essence, imitating a business process called Source to Pay.
You can learn more about this process here.
