Business Central: Your Solution for Procurement

Make-or-buy decision

The procurement management is involved in decisions of the management when it comes to determining procurement methods. For example, when deciding which products or components the company should produce internally and which should be purchased from external suppliers.

The system supports multiple planning options in procurement. This includes last-minute changes or make-or-buy decisions. You can determine purchase prices and manufacturing costs and derive your decision from them.

Reporting key figures

Furthermore, strategic procurement management is interested in or obligated within the company to evaluate and report purchasing key figures. You benefit from a strong reporting system, which is further enhanced by the integration of Microsoft Power BI. Through condensed data from all departments, you work with excellent decision templates – even when it comes to convincing others – and make well-founded decisions in the end.

There are over 100 standard reports available for your use. However, you can also create custom reports tailored to your company’s needs. Frequently used reports, which are available in the purchasing module, for example, at the touch of a button, include:

• Item ABC analysis
• Item inventory turnover
• Inventory value (see screenshot)
• Material requirements
• Inventory status (dimensions: purchase price variance, purchase/sales price list, by creditors, availabilities)

For the procurement management, procurement planning is one of the most important tasks. The expected and actual needs of the company are crucial for this. The goal is to avoid stockouts and keep ordering and inventory costs as low as possible. It is necessary to adapt to the market situation and plan accordingly in the short, medium, or long term.

The system automatically calculates the date by which you need to order an item to have it available in inventory by a certain date. If you specify a desired goods receipt date in a purchase order header, the calculated order date is the date by which the order must be placed to receive the items on the date you requested. If you do not specify a desired goods receipt date, the order date is used as the starting point for calculating the date by which the items are to arrive.

The system distinguishes four different replenishment methods to accommodate various industries and companies:

1. Fixed order quantity
2. Replenish to maximum
3. Order
4. Lot-for-lot

Various parameters can be considered depending on the method, such as:

• Item reservations
• Order quantity
• Inventory levels
• Lot accumulation period
• Replanning period
• Maximum stock
• Minimum stock
• Production type
• Safety stock
• Safety margins
• Tolerance quantity in percentage
• Overflow level
• Time frame

To decide on the replenishment method, the ABC analysis for classifying items serves as a basis. Items are classified into three different classes based on their value and volume relative to the total inventory. After classifying goods into these item classes, decisions about replenishment methods can be made:

• A-Items typically have a low order frequency, so inventory holding is not necessary. Demand for these should be planned order by order.
• For B-Items, the lot-for-lot method is recommended, where an order quantity is calculated to cover the sum of demand that will be due within a certain time frame.
• C-Items are items with high and regular order frequency. Here, the recommendation is to maintain availability consistently at a level (=minimum stock) but below the maximum stock.

Once the demand for the goods is determined, they need to be procured. This means that they are requested from one or more suppliers and eventually ordered from a selected supplier.

The basis for procurement is provided by the item and creditor master data. This master data is required in the procurement area for every purchase request, purchase order, and order processing. This highlights the necessity of correct master data management. Therefore, it is necessary to create the supplier as a creditor. The same applies to required items or references in the master data.

Subsequently, it is possible to generate a purchase request. This can be the initial draft for an order. If the procurement management and the selected supplier agree, the order is processed internally. For this purpose, the request can be converted into an order.

It is also possible to map blanket orders or framework contracts. These represent a framework for a long-term agreement between you and a creditor. A framework contract is typically created when a company commits to purchasing larger quantities, which will be provided over a longer period in several smaller deliveries.

After successful confirmation of the purchase request, a request can be converted into a purchase order by the supplier at any time, with the option to archive the request if desired. The conversion to a purchase order can be completed via the Create Order action.

The purchase order can then serve as the basis for later goods receipt and subsequent invoice posting, enabling items to be successfully booked into your own inventory and the order to be paid to the supplier.

Potential returns can also be processed based on this.