Purchasing policies overview – Supply Chain Management | Dynamics 365 | Microsoft Learn

This article provides information on purchasing policies. A purchasing policy is a set of rules that control the request process. Purchasing policies help purchasing managers implement their purchasing strategy by creating a policy structure that is aligned with the organization’s strategic purchasing requirements.

A purchase policy consists of a set of policy rules. When you define a policy rule, you first select a rule type. then create a rule for the rule type by defining the settings, start date, and end date of the rule.

Reading: Purchase the policy?

For example, an administrator creates a policy, selects the catalog policy rule type, and then adds a catalog policy rule to the policy. This catalog policy rule specifies that the adventure catalog should be used for internal purchases. once the purchasing policy is associated with a particular organization, employees of that organization see the adventure catalog when they create requests.

assigning policies to organizations

Before a policy can take effect, it must be associated with an organization. Purchasing policies are associated with the purpose of the internal procurement control hierarchy. therefore, purchasing policies apply only to organizations in hierarchies that have a hierarchical purpose of internal procurement control. you can also select organizations from the flat list of legal entities in the companyinfo table. these legal entities are designated in the policy framework as “companies”.

determine which rule to apply

Depending on how you set up your purchasing policies, various rules can affect users in an organization. The following examples illustrate different ways you can configure purchase policies and specify how the policies are applied when a transaction occurs.

example 1: simple purchase policy configuration

Organisations that are small and less complex can set purchasing policies by legal entity and can use only the organization hierarchy of companies.

For Fabrikam, a small business, purchasing requirements vary little across the organization. purchasing rules vary only between the legal entities of the organization. For example, employees of Fabrikam Canada and employees of Fabrikam U.S. buy goods and services from different catalogs and different suppliers. Therefore, Fabrikam sets its purchasing policies at the legal entity level.

fabrikam creates two purchasing policies. policy a applies to your us account. uu. legal entity, 1111. policy b applies to its canadian legal entity, 2222. when an employee in legal entity 1111 creates a purchase requisition, the policy rules are derived from policy a. for example, the product catalog that the employee sees is specified in the catalog policy rule for policy a.

When an employee of legal entity 2222 creates a purchase requisition, the policy rules are derived from policy b.

Note: If an employee of legal entity 1111 purchases an item on behalf of an employee of legal entity 2222, the policy rules that are specified for legal entity 2222 (i.e., policy rules apply policy b).

example 2: complex purchase policy configuration

In the example above, all purchasing rules were defined in a single organizational hierarchy, the company organizational hierarchy. however, a complex organization may define policies for multiple organization hierarchies.

Contoso is a large company that requires complex purchasing rules to control the application process. Contoso has defined rules for two different organizational hierarchies: department and global purchasing control.

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Policy 123 is defined for the Department Organization Hierarchy for the UK Sales Department. in policy 123, the purchase requisition control rule specifies that restrictions should be applied for minimum order quantities. in this rule, the apply minimum order quantity restrictions option is selected.

Policy 456 is defined for the global purchasing control organization hierarchy for the sales and marketing department. in policy 456, the purchase requisition control rule does not specify that restrictions should be applied for minimum order quantities. in this rule, the enforce minimum order quantity restrictions option is not selected.

sam works in the uk sales department at the contoso uk office. Policies for both department and global purchasing control organization hierarchies apply to its department. when sam creates a purchase requisition, the system must determine which policy to apply. The system administrator configured the purchasing policy parameters to specify that purchasing policies should be applied in the following order of priority:

  1. global purchasing control
  2. department
  3. companies
  4. Therefore, policy 456 applies to the purchase requisition that sam creates, and no minimum order quantity is required for the purchase requisition.

    policy rules

    catalog policy rule

    The catalog policy rule determines which purchasing catalog users see when they create purchase requisitions. if a user has been granted permission to order products on behalf of another user, the request uses the catalog policy rule that is defined for the requester’s legal entity and operating unit to determine which catalog to display. Before you can define a catalog policy rule, you must create and publish a shopping catalog.

    category access policy rule

    The category access policy rule determines which categories users have access to when creating purchase requisitions. if no rule is specified, all purchase categories can be added to the purchase request.

    1. Select the include parent rule option to apply the parent organization’s category access policy rule to the category.
    2. In the Available Categories panel, select the categories to which the rule applies. when you select a category, all categories higher in the hierarchy are also added to the list of selected categories.
    3. select the include subcategories option to apply the rule to all subcategories of the selected category.
    4. category policy rule

      the category policy rule defines how users can select providers for each category. it also defines requirements for the receiving and invoicing processes.

      purchase order reapproval rule

      The reapproval rule is an optional rule that defines the criteria for requesting reapproval when a purchase order is changed. the selected fields are evaluated in the purchase order workflow when the “purchase order reapproval required” condition is set in the workflow.

      purchase order request rule

      The purchase requisition rfq rule defines the criteria for requesting a request for quotation (rfq) for a purchase requisition line. if a line meets the conditions, the “informal rfq” or “formal rfq” stamp appears on the request line.

      purchase request control rule

      The purchase request control rule for requests of type consumption is an optional rule. when you create such rules, you can set options on multiple tabs:

      • On the workflow submission tab, you can configure the fields that must be entered on the request line in order for the request to be submitted for approval.
      • In the order quantities tab, you can configure the fields that are required in the purchase request under certain conditions. you can also enforce order quantities.
      • in the dates tab, you can configure if the accounting date is the same as the requested date
      • In the address tab, you can define if the user can create new addresses in the system to apply to the purchase request.
      • request purpose rule

        The request purpose rule is an optional rule that determines the type of request purpose that is allowed for a specific legal entity. Unless another purpose is stated in this rule, requests automatically have a consumption purpose when they are created.

        replenishment category access policy rule

        replenishment category access policy role is an optional rule that determines the products that are available to fulfill the request demand for a specific legal entity when the purpose of the request is replenishment.

        replenishment control rule

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        the replenishment control rule is an optional rule that defines the fields that must be entered on the request line in order for the request to be submitted for approval when the purpose of the request is replenishment .

        purchase order creation and demand consolidation rule

        The purchase order creation and demand consolidation rule defines the policy rules to be used when generating a purchase order from an approved purchase requisition. when you create such rules, you can set options on multiple tabs:

        • On the purchase order split tab, you can define criteria for dividing purchase requisition lines into separate purchase orders.

        • In the price/discount transfer tab, you can define when to recalculate the price agreement when a purchase order is created:

          • only if no trade agreement: Prices and discounts carry over from the purchase requisition only if there is no applicable trade agreement or base price. if a trade agreement or base price exists for the item or supplier, the prices and discounts are recalculated based on the trade agreement or base price and applied to the purchase order. Unless otherwise specified, this is the default behavior.
          • always: Prices and discounts always carry over from the purchase request.
          • You can also allow the requisitioner to change the price and discount transfer method for individual purchase requisition lines, regardless of the price/discount transfer rule that is defined. select the allow manual override per purchase requisition line option to enable this feature.

          • On the Item Description Transfer tab, you can transfer the request item description when it originates from a bid request.

          • On the Price Tolerance tab, you can define rules to route approved purchase requisitions through the review process when the price of a procurement catalog item increases. set the maximum amount that the net amount of a line item can increase on a purchase requisition between the time the purchase requisition is approved and the time the purchase order is created. the net amount is calculated using the following formula: ([quantity × (unit price – discount) ÷ price unit] + miscellaneous purchase charges) × (100 – discount percentage) ÷ 100 purchase requisition lines that exceed the tolerance The price tags you have set are kept for manual processing. The rules you configure on the error processing tab determine how the purchase requisition lines are processed.

          • on the error processing tab, you can configure the processing rule that is applied to a purchase request if validation fails during purchase order creation due to an error of the supplier or a price tolerance error. select one of the following options:

            • no action – Purchase requisition lines remain on the release approved purchase requisitions page. the status of the purchase requisition lines remains approved. however, the errors must be resolved before a purchase order can be generated for the purchase requisition lines.
            • cancel purchase requisition line: The purchase requisition lines are cancelled. the requestor can create a new purchase requisition for the canceled lines if they still want to request the line items.
            • create a new purchase requisition line: the purchase requisition lines are canceled. new purchase requisitions are then generated that contain only the purchase requisition lines that failed validation. the new purchase requests that are generated have a status of draft. these purchase requests can be resubmitted for review after validation errors have been resolved. the preparer of the purchase requisition lines is notified that the lines have been canceled and that new purchase requisitions have been generated for the failed purchase requisition lines.
            • In the manual creation of purchase orders tab, you can define the parameters that determine whether a purchase request must be processed manually or if it can be automatically converted into a purchase order. parameters can be applied to internal catalog items, external catalog items, or non-catalog items. select one of the following options:

              • create purchase orders manually – Create purchase orders manually for all purchase requests.
              • Create purchase orders automatically: Automatically creates purchase orders for all approved purchase requests. purchase requisitions are not held for manual purchase order creation.
              • Automatically create purchase orders except under these conditions – Manually create purchase orders for purchase requisitions that match criteria that you define. all other purchase requests that are approved are automatically converted to purchase orders. If you select create purchase orders automatically except under these conditions, you can add purchasing categories and vendors to specify which lines of approved purchase requisitions are held for manual processing. this option can be applied to internal catalog items, external catalog items, and non-catalog items. when you select a shopping category, any subcategories for that shopping category are also selected. select the all option for a specific purchase requisition line type to retain all lines of that line type for manual processing.
              • If you want purchase orders to be automatically generated from approved purchase requisitions when you run the purchase order generation batch job, select the run purchase order auto-creation option as a batch job. this option applies only to purchase requests that do not require manual processing. By running the automatic generation of purchase orders as a batch job, you can schedule this activity at a time when resources are less constrained. if the prepayment is required option is selected on the purchase requisition lines, select the option when the requisition is set to pay in advance to retain approved purchase requisitions for manual processing. Purchase requisitions that are held for manual processing can be filtered so you can see only those purchase requisition lines that require payment in advance.

              • On the demand consolidation tab, you can define the parameters that determine whether purchase requisitions that are manually processed can be considered for purchase requisition consolidation. parameters can be applied to internal catalog items, external catalog items, or non-catalog items. select one of the following options:

                • Do not allow demand consolidation – No approved purchase requisition lines are eligible for demand consolidation. This option is selected by default and only applies to purchase requisition lines that require manual processing for purchase order creation.
                • Always allow demand consolidation – All approved purchase requisition lines are eligible for demand consolidation. note: if you select the always allow demand consolidation option on the demand consolidation tab, but select create purchase orders automatically In the manual purchase order creation tab, all purchase requests are held for manual processing.
                • Allow demand consolidation under these conditions – Define the criteria that determine if approved purchase requisition lines are eligible for demand consolidation. For each purchase requisition line type, you can set the criteria by purchase category and vendor. If you select allow demand consolidation under these conditions, you can set the criteria by procurement category and vendor for each purchase requisition line type. when you select a shopping category, any subcategories for that shopping category are also selected. if you select the all option for a specific line type, all purchase requisition lines of that line type are eligible for demand consolidation.
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