Purchasing Policies

A purchasing policy is a collection of rules that control an element within the purchasing process. Rules are defined with a start and end date. Purchasing policies help procurement teams to implement their procurement strategy by creating a policy structure that is aligned with the organization’s strategic purchasing requirements. Use purchasing policies to set up rules for ordering products or services. The rules are defined for a specific purchasing policy which will be named as default by GYDE365. Once created, the impact of the rules will be noticeable within the system.

Procurement Level 1: Purchase order re-approval rules can be configured.

Procurement Level 2: Purchase order re-approval rules can be configured and purchase order consolidation rules can be configured.

Procurement Level 3: All purchase order rules cab be configured.

Purchasing policies enforce a level of control within the purchasing process. There are many types of procurement policies that can be built in line with business requirements.

Overview

The re-approval rule is an optional rule that defines the criteria for requiring re-approval when a confirmed purchase order is changed. The selected purchase order fields are evaluated when the “Requires purchase order re-approval” condition is set up in the workflow.

Purpose

The purpose of the re-approval rule is to control any changes made to purchase orders after they have been approved.

Example

A purchase order is inputted by a procurement administrator and proceeds through each stage of the approval process. A week later, another user makes a change to the order units on the purchase order line. Business X configured a purchasing policy that defined any change to the purchase order line, after purchase order approval, will require re-submission to the approval workflow. Therefore, the purchase order had to be re-submitted and re-approved in line with workflow requirements.

This rule requires procurement catalogs to be created and used within a business. (Procurement 3)

The catalog policy rule determines which procurement catalog users see when they create purchase requisitions. If a user has been granted permission to order products on behalf of another user, the requisition 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 procurement catalog.

This rule requires procurement catalogs to be created and used within a business. (Procurement 3)

The category access policy rule determines which categories users have access to when they create purchase requisitions. If no rule is specified, all the procurement categories can be added to the purchase requisition.

This rule requires procurement catalogs to be created and used within a business. (Procurement 3)

The category policy rule defines how users can select vendors for each category. It also defines requirements for the receiving and invoicing processes.

This policy requires purchase requisitions and request for quotations to be configured and used by a business (Procurement Level 3).

The purchase requisition RFQ rule defines criteria for requiring 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 requisition line.

The purchase order creation and demand consolidation rule defines the policy rules to use when a purchase order is generated from an approved purchase requisition. When you create rules of this type, you can set options on various tabs:

• On the Purchase order split tab, you can define criteria for splitting purchase requisition lines onto separate purchase orders.
• On 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 are transferred 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 vendor, the prices and discounts are recalculated based on the trade agreement or the base price, and are applied to the purchase order. Unless otherwise specified, this is the default behavior.
  • Always – Prices and discounts are always transferred from the purchase requisition.
  You can also allow the requester to change the method of price and discount transfer 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 capability.
• On the Item description transfer tab, you can transfer the item description from the requisition when it originates from an RFQ.
• On the Price Tolerance tab, you can define rules to route approved purchase requisitions back through the review process when the price of a procurement catalog item increases. Set the maximum amount that the net amount on a line item on a purchase requisition can increase between the time when the purchase requisition is approved and the time when the purchase order is created. The net amount is calculated by using the following formula: ([Quantity × (Unit price – Discount) ÷ Price unit] + Purchase miscellaneous charges) × (100 – Discount percent) ÷ 100 Purchase requisition lines that exceed the price tolerance that you set are held for manual processing. The rules that 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 requisition if it fails validation during purchase order creation because of a vendor error or a price tolerance error. Select one of the following options:
  • No action – The 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 the purchase requisition line – The purchase requisition lines are canceled. The requester 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 requisitions that are generated have a status of Draft. These purchase requisitions can be resubmitted for review after the validation errors have been resolved. The preparer of the purchase requisition lines is notified that the lines were canceled, and that new purchase requisitions were generated for the purchase requisition lines that failed.
• On the Manual purchase order creation tab, you can define the parameters that determine whether a purchase requisition must be manually processed, or whether it can be automatically converted to a purchase order. The parameters can apply to internal catalog items, external catalog items, or non-catalog items. Select one of the following options:
  • Manually create purchase orders – Manually create purchase orders for all purchase requisitions.
  • Automatically create purchase orders – Automatically create purchase orders for all approved purchase requisitions. No purchase requisitions are held for manual purchase order creation.
  • Automatically create purchase orders except under these conditions – Manually create purchase orders for purchase requisitions that match the criteria that you define. All other purchase requisitions that are approved are automatically converted to purchase orders. If you select Automatically create purchase orders except under these conditions, you can add procurement categories and vendors to specify which approved purchase requisition lines are held for manual processing. This option can apply to internal catalog items, external catalog items, and non-catalog items. When you select a procurement category, any subcategories for that procurement category are also selected. Select the All option for a specific type of purchase requisition line to hold all lines of that line type for manual processing.
  If you want purchase orders to be generated automatically from approved purchase requisitions when the batch job for purchase order generation runs, select the Run automatic purchase order creation as a batch job option. This option applies only to purchase requisitions that don’t require manual processing. By running automatic purchase order generation as a batch job, you can schedule this activity at a time when resources are less constrained. If the Prepayment required option is selected on the purchase requisition lines, select the When the requisition is set up for prepayment option to hold approved purchase requisitions for manual processing. Purchase requisitions that are held for manual processing can be filtered so that you can view only those purchase requisition lines that require prepayment.
• 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. The parameters can apply 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 applies only 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 you select the Automatically create purchase orders option on the Manual purchase order creation tab, all purchase requisitions are held for manual processing.
  • Allow demand consolidation under these conditions – Define the criteria that determine whether approved purchase requisition lines are eligible for demand consolidation. For each type of purchase requisition line, you can set the criteria by procurement category and vendor. If you select Allow demand consolidation under these conditions, you can set the criteria by procurement category and vendor for each type of purchase requisition line. When you select a procurement category, any subcategories for that procurement 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.

Please find below the relevant PCF ID’s.

Level 1 Category: 10216

Level 2 Process Group: 10279

Level 3 Process: 10292, 10295