The purchasing of direct materials scenario covers the process of material purchase from vendors on a contractual basis for a fixed period of time or an amount of product. It can also be used for purchasing direct works. For repetitive manufacturing, materials are usually purchased under long-run contracts.

Purchasing direct materials is started by generating plan-based purchase orders and ends with receiving them in the warehouse for subsequent use in production or sales.

The received goods are tracked and stored in the warehouse.

The scenario covers the processes of purchasing goods that are not normally used in manufacturing as materials or in sales as trading goods but stored to use them later for general and supporting activities. Numerous consumable goods are purchased and not immediately transferred to the consuming unit but put away into a warehouse and consumed over a period of time.

The cost of goods may include purchasing costs as well as procurement costs, such as custom fees, transportation, storage services, and other.

The goods are normally consumed as an indirect expense, charged to the expense item and dimension: a business unit, a cost center, a line of business, and other.

This scenario can be applied for purchases of office supplies, IT equipment (if not an asset), or for maintenance materials and spare parts.

The scenario covers the processes of purchasing goods that are not normally used in manufacturing as materials or in sales as trading goods but are immediately consumed for general and supporting activities.

The scenario is normally applied for purchasing goods with a predefined purpose, for example, office supplies, special equipment.

The purchasing standard services scenario covers the process of receiving services from vendors on a contractual basis for a fixed period of time or an amount of service.

Typically, these standard services are used for general and supporting activities. Direct production services or works or outsourcing business processes are not covered by this scenario.

The services are regularly purchased under long-run or recurring contracts.

Purchasing ad-hoc services scenario covers the process of receiving customized services from vendors under one-off orders for a fixed amount of services.

The scenario is simplified. It skips purchase requests, purchase orders, and starts immediately from registering invoices without a reference to a purchase order.

Typically this scenario is used for ad-hoc or complex services (for example, for projects needs) as well as for one-off non-material services. For example:

• Acquire fixed assets and related services.
• Purchase complex asset construction services.
• Bank fees.
  
• Other one-time services.

The "Purchase-to-order (sales through our warehouse)" scenario describes the purchase of third-party products for their subsequent delivery to the customer. This scenario can be used with the "Sales of goods through our warehouse (Purchase-to-order)" scenario. Firstly, a customer places a sales order, then a purchase order is placed for these goods to a vendor, then goods are received to the company's warehouse. After that, the goods must be delivered to the customer within the referenced sales order. This scenario is often used when it is impossible or not desirable to deliver goods from the vendor directly to the customer.

The goods return to vendor scenario includes a process flow that deals with sending complaints to vendors relevant to initiate a purchase dispute and resolved with the physical return of goods to the vendor.

Complaints that require physical return of products are mainly related to disputes around delivery that do not meet the confirmed product specification and quantity.

In rare cases, there may also be a dispute about the delivery timing and goods damages that took place during transportation.

The company receives a full compensation from the vendor by issuing a credit memo.

The scenario can be triggered from all the scenarios related to purchasing materials from vendors.

The packaging return to vendor scenario covers receiving of packaging from vendors during purchase of goods as well as its pick-up or redemption.

This scenario applies to those packaging units that are valuable and reusable.

The scenario additionally covers deposit conditions when our company pays a cash deposit for the provided packaging units.

Within the scenario the packaging units are held by our company. Besides the goods ownership, the packaging still belongs to the vendor. Under the contract terms, the packaging units are sent back or the vendor picks them up if they previously inform us that the packaging material can be picked up.

Oftentimes, under the contract terms it is possible to redeem returnable packaging units. In this case, the goods price is increased by the packaging unit price that triggers a debit note issue, or an additional packaging unit is added to a purchase order and a stand-alone invoice is issued.

The subcontract manufacturing scenario covers the process flow that relates to procurement of external manufacturing services that requires transfer of raw materials and components to the vendor and receipt of a finished product (work performed).

This scenario has different alternatives:

• Purchase from a subcontractor a specific manufacturing service, which is a certain production stage in the entire in-house manufacturing process (external subcontracting).
• Purchase of the entire production cycle (toll manufacturing).

You can initiate the subcontract manufacturing scenario from any production scenario as well as from a sales order.

The required raw materials and components are provided to the subcontractor by the company in accordance with the BOM and route sheets. Manufactured products are delivered to the company's warehouse.

Contracts with subcontractors usually include the terms of regular issue of notifications of available raw materials and components, physical inventory count results, and products manufactured during the reporting period.

The consignment procurement scenario covers the flow of sequential processes of providing goods by the vendor to the company on consignment terms.

Within this scenario, the vendor provides materials and stores them in the company's warehouse. Goods are provided mainly for resale purposes. Before its use by the company, the goods belong to the vendor.

In rare cases, this consignment procurement scenario is used for consumption by the company for internal needs (for example, manufacturing). In this case, the consignment procurement scenario is similar to the S2P Procurement via vendor-managed inventory scenario. All goods consumed by the company need to be redeemed, and an invoice issue must be initiated.

Consignment contracts usually define the terms of regular notifications about the sale of goods, goods consumption, and identified goods shortages.

The company regularly tracks the consignment goods level and sales statistics to timely initiate the follow-up actions:

• Consignment goods replenishment (fill-up).
• Consignment goods redemption.
• Consignment goods pick-up by the vendor.

The procurement via vendor-managed inventory (VMI procurement) includes the process flow related to outsourcing inventory management functions from customer (the considering company) to the vendor.

The vendor solely defines and fills up the customer's warehouse with its goods. The customer, in turn, consumes these goods for its own needs, most often for manufacturing.

In rare cases, depending on the terms of the VMI contract with the vendor, the goods may be sold to a third party. In this case, this scenario is a type of the S2P Consignment procurement scenario.

In the VMI procurement scenario, the vendor regularly monitors VMI stock, material consumption, and replenishment initiation. This scenario implementation requires tight integration with the vendor's information systems as well as regular and consistent information exchange.