Watch the following video to learn about operational contract management and how to use contracts in procurement activities in S/4HANA Cloud.
The solution process Purchase Contract describes how you can use contracts in procurement activities. Contracts are agreements with suppliers to supply materials or services under negotiated conditions and within a certain period.
Before we understand the business process of a purchase contract, let us first look at the business context of Operational Contract Management. Contract management is the process of managing contract creation, execution, and monitoring to maximize operational and financial performance. Organizations encounter an increasing amount of pressure to reduce costs and improve company performance. Consequently, it is essential that purchasers have an effective and efficient system that provides support for monitoring contracts, including the following:
Value contracts are agreements for a company to order certain materials and services that you receive within a specified time period and for a value up to a specified target value. A value contract can contain certain materials or a group of materials (product hierarchy, assortment module).
Quantity contracts are agreements for a company to order a certain quantity of a product during a specified period. In source determination, contracts replace the purchasing information records and can be assigned in the source list as the fixed source for Material Requirement Planning (MRP). Target groups are purchasing managers as well as buyers. If purchase requisitions and purchase orders do not yet exist, they are created after the contract. You can check the released purchase orders that are referenced to a contract by monitoring the contract.
The following diagram shows the key process flow of the purchase contract.
You can find the complete Solution Process Flow on Process Navigator - SAP for Me:
