Blanket PO functionality in MM

Question

Hi All:
I am a FICO guy and need some assistance in understanding Blanket PO Functionality in SAP.
This is what I have understood so far:
? Use FO document type in ME21
? Use "B" in item category
? Provide a maximum limit for Blanket PO (BPO)
? Provide validity for BPO
? We create a blank PO with unspecified materials, quantity  
   and delivery dates
This is what I would like to know:
? Lets say the BPO was created on Jan 1, and the requirement for procurement arises in March, June, October and December. In this case do we have to create a new PO with reference to BPO for each of these months?
? If not, do we have to modify the BPO that was originally created?
? How does vendor receive our requirement for materials?
? Can we use ERS in this case for automatically generating invoices?
Edited by: Vj on Dec 17, 2007 12:12 PM

Answer 1

hi,
This is what I would like to know:
1. Lets say the BPO was created on Jan 1, and the requirement for procurement arises in March, June, October and December. In this case do we have to create a new PO with reference to BPO for each of these months?
Answer: there is no need to create the separate PO for each month. the use of framework order and item category B open the value limits and validity period. give the validity period as per your requirement and the value.
thru BPO you  instruct the vendor before hand in this particular period you are going to buy these specific material of total amount assigned. you can call him and inform that you require that material, it is helpful in those cases.
2. If not, do we have to modify the BPO that was originally created?
Answer: if the material are not covered what you have agreed with him may be yes.
3.How does vendor receive our requirement for materials?
Answer: you can make a call or send a intimation about this.
4.Can we use ERS in this case for automatically generating invoices
Answer : yes you can.
I am writing below the complete process of BPO, this will clear your doubts.
The use of blanket purchase orders enables you to simplify the procurement process for low-value consumables and thus reduce costs.
**Business Example
For some of the office supplies needed by your firm, you can simply phone your vendor to give notification of your requirements. The goods are then delivered directly to the individual offices, so that a confirmed
goods receipt does not have to be recorded in the system. To cover such transactions, you have created a blanket purchase order in the system.
You check each invoice you receive from the vendor against the limit and validity period of the blanket PO.
Advantages of Blanket POs
With certain procurement transactions, the costs of procurement are disproportionately high in relation to the value of the material or service involved. This is frequently the casewith office supplies (such as pencils
and notepads) and services of relatively minor importance (such as small repairs, cleaning work, and courier services), for example.
Procurement costs - which in the case of standard procurement processes can be quite high - are significantly reduced if a so-called blanket purchase order is created instead of a standard PO. Such a single long-term purchase order can be used to procure a variety of materials or services whose
modest value does not justify the high processing cost of issuing a series of individual POs.
The main advantage of using blanket POs is thus the associated reduction in order processing costs. Transaction costs are lower with blanket POs because:
• The blanket PO is valid for a longer period.
• There is no goods receipt or service entry.
• It is not necessary to create PO items for individual procurement transaction
When creating a blanket PO, you should use document type FO because this document type causes the header fields Validity Start and Validity End to become mandatory entry fields. You must enter the item category B in the PO item overview. The entry of this item category causes the Limits tab page to appear on the item detail screen. There, you enter an overall limit and an expected value. The overall limit represents the maximum value for which invoices referencing the PO item can be posted without the system issuing messages. If the overall limit is exceeded when an invoice is posted, the system issues a warning or error message, depending on the settings in Customizing.
The expected value is the anticipated end value of the order placed with the vendor. If you work with the release procedure for purchasing documents, this value can serve as the basis for assigning this blanket PO to a release strategy. Controlling establishes the PO commitment from this value. The system does not check whether the expected value is exceeded when an invoice is posted with reference to a blanket order.
In the standard system, the account assignment category U (unknown) is allowed for POitems of item category B. You need not specify the account assignment until the time of invoice entry.
When creating a blanket purchase order, you need enter neither an order quantity nor a net price. As soon as the expected value is specified during the creation of the blanket PO, it is automatically adopted as the net price.
Regards
Rajesh