Procure materials and services overview

Applies to: Dynamics 365 Commerce, Dynamics 365 Field Service, Dynamics 365 Finance, Dynamics 365 Project Operations, Dynamics 365 Supply Chain Management

This article describes how you can use Dynamics 365 products to support your organization's business processes for procuring materials and services.

The procurement of materials and services within the Source to pay business process focuses on efficiently meeting the organization's needs by acquiring essential materials or services. It covers the activities that are required to raise the order to the external vendor. The goals are to ensure the availability of materials and services for the organization, and to efficiently manage inventory levels and cost.

Procurement of materials and services requires coordination and communication between many departments, such as engineering, operations, quality sales, planning, and production.

Dynamics 365 Supply Chain Management has extensive capabilities for sourcing and procuring materials and services. These capabilities ensure that projects and processes can proceed efficiently and successfully in the business process for procuring materials and services.

To initiate the procurement process, a purchase requisition (PR) is created that identifies internal needs.

The organization uses the request for quotation (RFQ) process to gather competitive bids and select the most suitable supplier. The vendor collaboration portal enables external vendors to participate in the request for quotation process and helps improve communication about specific requests for quotation.

The purchase agreement process allows for the creation of a contract that commits the organization to buying a specified quantity or amount over time, through multiple purchase orders. In exchange for this commitment, the buyer receives special prices and discounts.

The purchase order (PO) finalizes the agreement. It provides details about the terms and conditions of the transaction and authorizes the supplier to fulfill the order.

Together, the purchase requisition, request for quotation, purchase agreement, and purchase order documents streamline the procurement process, ensure transparency, and contribute to an effective and efficient purchasing process.

The outcomes of the procurement process, including quality, quantity, price, and timing/date, significantly affect the overall performance and profitability of the organization.

Define this business process at the beginning of the implementation of Dynamics 365 Supply Chain Management. It's a foundational process for any organization.

Stakeholders

Many people across the organization should contribute to the business process for procuring materials and services. The list includes but isn't limited to:

• Procurement stakeholders, such as buying agents, purchasing agents, and purchasing managers. These stakeholders are directly involved in the procure materials and services business process area.
• Production stakeholders, such as production supervisors, production managers, and material managers. These stakeholders ensure that inventory is available for production processes.
• Retail stakeholders, such as retail store managers. These stakeholders monitor the supply of materials to ensure store operations.
• Project stakeholders, such as project managers and project assistants. These stakeholders ensure the availability of services and goods for their respective projects.
• Finance stakeholders, such as accounts payable clerks, budget managers, treasurers, and accountants. These stakeholders closely monitor the process of procuring material and services, so that they can plan their activities that are related to accounts payable.

Procure materials and services process flow

The following diagram illustrates the procure materials and services business process area.

Each solid gray rectangle on the diagram represents an end-to-end business process. The solid blue rectangle represents the business process area. The diagram shows the subprocesses for the business process area. The arrows on the diagram show the flow of the business process in an organization. If a subprocess can lead to more than one other subprocess, the parallel subprocesses are shown as branches.

The flow diagram covers the following steps.

1. Start

   1. A parallel branch from Start includes the Acquire to dispose end-to-end process.

      1. Acquire assets business process area

         1. Procure materials and services business process area

   2. A parallel branch from Start includes the Forecast to plan end-to-end process.

      1. Plan supply and replenishment business process area

         1. Create purchase order business process

   3. A parallel branch from Start includes the Plan to Produce end-to-end process.

      1. Outsource production order business process area

         1. Procure materials and services business process area

   4. A parallel branch from Start includes the Order to cash end-to-end process.

      1. Create and manage sales order business process area

         1. Create purchase order business process

   5. A parallel branch from Start includes the Project to Profit end-to-end process.

      1. Manage project delivery business process area

         1. Procure materials and services business process area

   6. A parallel branch from Start includes the Invent to delivery end-to-end process.

      1. Process inbound goods business process area

         1. Return?

            1. "No" leads to End.
            2. "Yes" leads to the Return items to vendors business process.

      2. Process outbound goods business process area

         1. End

2. Source to pay end-to-end process

3. Procure materials and services business process area

   1. A parallel branch from Procure materials and services includes the Create purchase requisitions business process.

      1. Is RFQ needed?

         1. "Yes" leads to the Create request for quotations (RFQ) business process.
         2. "No" leads to the Create purchase order business process.

   2. A parallel branch from Procure materials and services includes the Create request for quotations (RFQ) business process.

   3. A parallel branch from Procure materials and services includes the Create volume or quantity purchase agreements (blanket orders) business process.

4. Create purchase requisitions business process

5. Create request for quotations (RFQ) business process

6. Create volume or quantity purchase agreements (blanket orders) business process

7. Create purchase order business process

   1. A parallel branch from Create purchase order includes the Confirm and send purchase order to the vendor business process.
   2. A parallel branch from Create purchase order includes the Return items to vendors business process.

8. Confirm and send purchase order to the vendor business process

9. Update purchase order business process

   1. Process inbound goods business process area

10. Return items to vendors business process

    1. Process outbound goods business process area

11. End

Procure materials and services benefits

There are many key benefits that can be used to monitor and measure the success of implementing technology to support the procure materials and services business process area. The following sections outline the key benefits that an organization might monitor and measure for procure materials and services.

Improved procurement and sourcing accuracy

Accurate identification of direct and indirect procurement needs is the first, crucial step in the procurement process. It involves determining what goods and services the business requires, in what amount, when, and where. This step helps prevent unnecessary or wasteful purchases, optimize the use of resources and budget, and align the procurement strategy with business goals.

Efficient processing of purchase orders

A well-defined purchase order processing system helps an organization save time, money, and resources when it procures materials and services. It also helps improve the quality and compliance of the products and services, and provides useful data and insights for optimization.

In Dynamics 365 Supply Chain Management, the purchase order processing capability is well integrated with inventory and finance processes. It serves as one of the key capabilities for conducting an efficient, streamlined, and end-to-end procurement process.

Streamlined approval workflow

Procurement and sourcing workflows in Dynamics 365 Supply Chain Management help automate the approval process for various documents and ensure consistent and efficient processes. You can track the status and performance of each workflow and manage your tasks from a centralized work list.

To manage the processes that are related to procuring materials and services, you can use a workflow framework that is extended for purchase requisition, purchase agreement, and purchase order processes.

Enhanced compliance

Organizations can use the change management feature in Dynamics 365 Supply Chain Management to manage the modifications that are applied to purchase orders. This feature adds a workflow when a purchase order is changed, to provide an extra level of approval for any change.

Whenever an approved purchase order is confirmed, it creates a confirmation journal. This confirmation journal keeps a snapshot of what was confirmed as part of the purchase order. Therefore, it provides a better trail for audit purposes.

Next steps

If you would like to implement Dynamics 365 solutions to assist with your procure materials and services business processes, you can use the following resources and steps to learn more. (Links are added, when the articles are ready.)

1. Define procurement and sourcing strategies

2. Define procurement catalogs

3. Manage vendor relationships

4. Procure materials and services (the article that you're currently reading)

5. Process vendor invoices

6. Issue and settle vendor payments

7. Process vendor rebates and incentives

Related information

You can use the following resources to learn more about the procure materials and services process in Dynamics 365.

• Purchase requisition overview

• Purchase requisition workflow

• Requests for quotation (RFQs) overview

• Purchase order overview

• Approve and confirm purchase orders

• Purchase agreements

• Vendor collaboration portal

• Create a purchase return order

• Find definitions of terminology that's used in content for procure materials and services in the Glossary of terms in Dynamics 365 business processes article. For example, this glossary includes the following terms:

  • Purchase agreement
  • Purchase order
  • Purchase requisition
  • Request for quotation

Contributors

This article is maintained by Microsoft. It was originally written by the following contributors.

Principal author:

• Amar Kumar | Senior Solutions Architect, FastTrack for Dynamics 365

Other contributors:

• Adi Vijayashankar | Senior Solutions Architect, FastTrack for Dynamics 365