SAP Business One is a completely integrated ERP application developed by SAP, the world leader in ERP solution, for companies that belong to the Small and Medium sector (SME). It allows the company to get complete visibility into its operations, reduce manual work, improve processes, increase overall productivity, and reduce working capital and so on. In this blog, we will be focusing on specific benefits of SAP Business One in Procurement Management or Procure-To-Pay process and how the former helps a company to adopt best practices in this domain.

Planned Procurement of Raw Materials

SAP Business One provides a functionality called Material Requirement Planning (MRP) which automates the process of finding out the potential material shortages with respect to a proposed fulfillment of a sales plan.
System aggregates all demand elements and does backward calculation of materials and sub-assemblies required and makes recommendation on what item needs to be procured, in how much quantity and what should be the PO release date.

This process can take care of all the items are a part of the bill of material of any FG or WIP.

Procurement of consumables based on inventory levels

Certain items, normally found in C class, need to be planned based on consumption.

SAP Business One provides a functionality by which users can store the minimum and maximum inventory quantity (location wise). Further, the system recommends

procurement proposals based on the trigger of inventory falling below the minimum level.

Reduction in maverick spend

Maverick spend means placing orders at prices higher than the prices negotiated in contract, usually done without consulting the procurement department.

SAP Business One will put a complete end to such procurement and will instill a much disciplined process for procuring material and services. Only authorized users from purchase department can raise Purchase Orders in the system.

PO approvals

SAP Business One allows you to set up value based rules that help the system determine automatically, as to whose approval is required for a particular PO in the system. Needless to say, procurement against a PO is only possible if it authorized/approved by the concerned authority.

Since this process cannot be circumvented, management can be assured of the fact that no untoward practices can prevail in the company.

System Control on buying prices

When manual systems are used it is possible that rates in the purchase order may, either inadvertently or on purpose, be higher than what has been agreed on contract or price list.

With SAP Business One, there are two ways by which such situations can be eliminated.

Option one is to use a price list functionality. Using this, the system will automatically populate the price as maintained in the price list and user will be allowed only to reduce the price, if at all changes are allowed.

Second option is to use the functionality called Blanket PO where a contract is created in the system for a combination of item and vendor and all further POs for the same combination will necessarily pick the prices from this contract and user will be allowed only to reduce the price, if at all changes are allowed.