How are POs and Contracts are related?

[Former Member]

We are ABAP4 developers and pretty new at MM module. We would be appreciated if some MM experts here can tell us the relationship between Contracts/RFQs and POs!

Thanks and we will give you points!

[Former Member · Accepted solution]

Check this link for more details

http://help.sap.com/saphelp_erp2005/helpdata/en/75/ee0aaf55c811d189900000e8322d00/content.htm

A purchasing document is an instrument used by Purchasing to procure materials or services.

The following list shows the various external purchasing documents available in the standard SAP System. (Note: purchase requisitions are not included on this list because they are usually regarded as internal documents used within Purchasing and are therefore treated separately.)

Request for quotation (RFQ)

Transmits a requirement defined in a requisition for a material or service to potential vendors.

Quotation

Contains a vendor's prices and conditions and is the basis for vendor selection.

Purchase order (PO)

The buying entity’s request or instruction to a vendor (external supplier) to supply certain materials or render/perform certain services/works, formalizing a purchase transaction.

Contract

In the SAP Purchasing component, a type of "outline agreement", or longer-term buying arrangement. The contract is a binding commitment to procure a certain material or service from a vendor over a certain period of time.

Scheduling agreement

Another type of "outline agreement", or longer-term buying arrangement. Scheduling agreements provide for the creation of delivery schedules specifying purchase quantities, delivery dates, and possibly also precise times of delivery over a predefined period.

[Former Member · Accepted solution]

hi Nitin,

We just ask a simple question about the relationship between PO and Contract. You list a long definations of these two, but no any relation is specified!!!

Thanks anyway

[Former Member · Accepted solution]

Hi Kevin,

Sorry about that.. let me try & explain

<u><b>CONTRACT</b></u>

if you wish to enter into longer-term purchasing arrangements with vendors , then you have contracts.

a contract (qty / value) is a purchase agreement against which release PO's (releases) can be issued as and when required.

<u><b>RFQ</b></u>

the RFQ as the name suggests is a request for quotation from the vendor. Prices and conditions quoted by vendors are then entered in the original RFQ.

You can then compare the prices from all quotations received using the price comparison list & then issue a PO to the vendor you select

[Former Member · Accepted solution]

hi Nitin,

So usually a contract is created first, then PO is created later agains this contract, right? Also a contract could contain many POs?

Thanks

[Former Member · Accepted solution]

You are right

To see the release history from the contract, on the menu :

Item --> Statistics --> Release documentation.

or

Goto --> Release details.

[Former Member · Accepted solution]

hi Nitin,

When we say release, only POs can be released agains Contract, right? A contract can't be released, right?

Thanks

[Former Member · Accepted solution]

Hi Kevin,

You are right. In this case, the PO itself is called the release.

Hope I have answered all your questions now.

Nitin

[Former Member · Accepted solution]

Yes you are right. Contract is like a Outline purchasing agreement and against which we can release any number of purchase orders till the contract terms and conditions are met in a overall time frame. These purchase orders are also called as a contract release orders

Basically Contracts are in two forms

Value contract and quantity contract

in this terminalogy release means release of purchase order against contract

Hope this helps

Thnaks

Sat