Functional Design Document

1) Creation of Purchase Requisition:

Purchase Requisition (PR): The Initial Step

A Purchase Requisition (PR) serves as the foundation of the P2P process in SAP. It is a formal request
made by a department or user within the organization to notify the procurement team about their
material or service requirements. Here’s a deeper look at the key elements: (Transaction
Code: ME51N)

 Document Type: The document type in SAP PRs is significant as it determines the number
range assignment and which fields need to be filled out. Different types may exist for
different types of procurement needs, allowing for customization and control.
 Material: This is where the requester specifies the material or service they need. It can be a
physical item, a service, or even an intangible asset.
 Quantities: In this section, the quantity of the material or service required is detailed. This
quantity is critical for determining the scope of the procurement.
 Delivery Date: The requested delivery date is crucial information for the procurement team
and suppliers. It specifies when the goods or services should be delivered or performed.
 Plant: Organizations often have multiple plants or locations. This field indicates where the
materials will be used, or the service will be performed.
 Storage Location: Storage locations within a plant may vary. Specifying the storage location
helps in inventory management and logistics.
 Purchase Group: A purchase group is responsible for specific purchasing activities. It could
be a single buyer or a team of buyers handling similar items or services.

 Check: Before finalizing the PR, it’s essential to review the document for accuracy and
completeness. Using the “Check” function helps identify any issues before saving the
document.
  Save: Save the PR document, This action generates a unique document number for
reference.

Release approval for Purchase Requisition:

The purchase requisition doesn’t automatically lead to a purchase order. Before moving forward in
the P2P process, PRs often require approval. The approval process can vary depending on the
organization’s structure and policies. The key aspects include:

Approvers: Typically, the head of the user department and the inventory controller are involved in
the approval process. The specific individuals responsible for approval can vary based on the
organization’s hierarchy and practices.

The transaction code for the PR release is ME54N.

Once a PR is approved, it advances to the next stage, which is typically the creation of a Request for
Quotation (RFQ) or a Purchase Order (PO).

2) Create a request for quotation:

Selecting Suppliers:

The creation of a Request for Quotation (RFQ) is a pivotal factor in the purchase to pay process
steps, as it helps in selecting the right suppliers for the procurement. Here’s a more detailed
breakdown:

To create a request for a quotation, the transaction code is ME41.

 1. Quotation Deadline: The RFQ process includes setting a deadline by which suppliers must
submit their quotations. This deadline ensures that suppliers respond promptly.
2. Organization Data: This section specifies the responsible purchase organization and
purchase group. It helps route the RFQ to the correct team within the organization.
3. Reference Document: RFQs often reference other documents, such as a purchase
requisition or an outline agreement. Referencing provides context and ensures alignment
with the procurement request.
4. Reference Document Number: The reference document number is entered here, linking the
RFQ to the relevant document.
5. Execution: The “Execution” function is used to adopt details from the selected reference
document, streamlining the RFQ creation process.

6.After these initial steps, the RFQ details are reviewed to ensure accuracy, including quantities,
delivery dates, and quotation deadlines. Any necessary corrections are made.
7.Supplier Details: To send RFQs to specific suppliers, their details must be entered here.

8.Supplier Number: If you have a vendor number for a supplier, it can be assigned in this section.
The remaining supplier information is typically populated from the vendor master record in SAP.

9.Save: Once the RFQ is complete, it’s saved in SAP, and a unique quotation number is generated for
tracking purposes.

This process is repeated for each supplier from whom you require quotations.

a) Maintain request for quotation:

Keeping RFQ Details Up to Date

After suppliers respond with their quotations, you may need to update the RFQ with the details
provided by each supplier. Here’s a closer look:

The transaction code for maintaining RFQ is ME47.

 RFQ Number: To maintain the RFQ and incorporate supplier responses, you need to enter
the RFQ number.
Update Details: This is where you input the quantities, delivery dates, and prices provided by each
supplier in their quotations. It’s essential to ensure that the RFQ number aligns with the correct
supplier details.

Save: After updating the RFQ with supplier responses, you save the information to keep it up to
date.

This process is repeated for each supplier that has submitted quotations.
b) Comparison of Request For Quotation:

To make an informed decision about which supplier to choose, you’ll need to compare the
quotations you’ve received. Here’s how it’s done:

 Purchase Organization: Enter the responsible purchase organization number, which helps
narrow down the relevant quotations.

 Quotation Number: Input the quotation numbers of the quotations you want to compare.

 Execute: Running this function triggers the system to rank suppliers based on their quotation
prices. The ranking helps in the selection process.

The transaction code for comparing RFQ is ME49.

The system will propose the rank based on the quotation price. By executing this process, the
supplier shall be finalized for the further process.

3) Create Purchase Order:

The Legal Document

After selecting the supplier through the RFQ process, the next step is to create a Purchase Order
(PO). A PO is a legally binding document that formalizes the procurement of materials or services
from the chosen supplier. This is an external document that is used to request the procurement of
material or service from a vendor. Generally, purchase order creations are made based on the
reference of purchase requisition, request for quotation, or outline agreements.
The transaction code for creating a purchase order is ME21N.

 Document Type: The document type controls the number range and field reference of the
PO. Different document types may be used for various procurement scenarios.
 Document Overview: This provides an easy-to-navigate overview of reference documents
for users to access related information.
 Selection Variant: This helps adopt details from the reference document. It streamlines the
creation process by automatically filling in supplier, organization, and procured material.

Based on the reference document, supplier details, organization data, and procured material are
updated automatically.

 Confirmation Control Key: This describes the order acknowledgment or Advance Shipment
Notice (ASN) process. Details from suppliers about the order, such as delivery dates and
quantities, are received based on this key.
 Save: After all necessary details are entered or adopted, the PO is saved. This action
generates a unique document number for reference.
Advanced Shipping Notification (ASN):

Confirming Shipped Quantities

The Advanced Shipping Notification (ASN) confirms the quantity of material to be shipped by the
supplier. This step ensures that the actual shipment aligns with the purchase order. Here’s a closer
look:

To create an inbound delivery, the transaction code is VL31N.

 1. Reference document: Enter the Purchase order number to create an inbound delivery.

2. Save: Update the Delivery quantities and save the document. An inbound delivery document
number is generated for tracking.

The supplier updates the ASN to confirm the quantity of materials shipped, and this information is
later verified by the procurement department.

Once the supplier updates the ASN, the purchasing department can check the confirmation by using
the ME23N transaction.
4.Goods Receipt (GR):

The Goods Receipt (GRN) process is crucial in the P2P cycle as it records the physical receipt of goods
from the supplier into the buyer’s inventory. This step is critical for tracking inventory levels and
ensuring the quality of received goods. Here’s what you need to know:

Executable Action: This field refers to the specific business transaction that you would like to enter
in the system, which, in this case, is a goods receipt.

 Reference Document: Indicate that the document type is the reference for this action.
 Document Number: Provide the reference document number (usually the Purchase Order
number).
 Execute: Based on the reference document and the Advanced Shipping Notification (ASN),
Goods Receipt details are automatically updated. This process ensures that what was
ordered has been received.
The transaction code for creating goods receipts
is MIGO.

 Post: Save the document. Material document number has been generated.
The Goods Receipt process is crucial for keeping accurate inventory records and verifying that the
received goods match the purchase order and ASN.

GRN details are updated in the purchase order item details view by executing
the ME23N transaction code.

5) Invoice verification:

The Final Step:

Invoice Verification is the last step in the (PTP) purchase to pay process, and it’s where vendor
invoices for the received goods or services are verified and processed. This step ensures that the
invoiced amount matches the purchase order and goods receipt. Here’s how it’s done:

 Transaction: Select “Logistics Invoice Verification” to initiate the processing of invoices

within SAP.
 Invoice Date: Enter the supplier’s invoice date, which is typically indicated on the invoice
itself.
 Reference Document Number: This section contains the document number of the business
partner or vendor, helping to identify the source of the invoice.
 Reference Document category: Enter the reference document number for which the invoice
verification needs to be performed. Usually, this would be the Purchase Order number.
 Tax Code: Select the applicable tax code for the invoice.
 Invoice Amount: This section is used to verify the invoice against the purchase order amount
and update it if necessary.

The transaction code for invoice verification is MIRO.

  Save: After verifying the details and ensuring that the invoice matches the purchase order
and goods receipt, save the document. This generates a document number for tracking.

Invoice verification details are updated in the purchase order item detail’s view, by executing
the ME23N transaction code.