Oracle Cloud Fusion SCM

Procurement

Procurement refers to the process of obtaining goods, services, or works from an external source, often via a tendering or purchasing process. It involves the entire set of activities related to acquiring goods and services, including planning, sourcing, purchasing, and managing supplier relationships. Procurement is a critical function in both public and private sector organizations, ensuring that the necessary resources are available to meet business needs efficiently, cost-effectively, and in a timely manner.

Types of Procurement

1. Direct Procurement (or Direct Sourcing)

Description: Involves acquiring goods and services that are directly related to the core operations of a business, often for manufacturing, production, or day-to-day operations.
Examples: Raw materials, components, machinery, and equipment used in production.
Purpose: Ensures that the organization has the materials required for its primary business functions, such as producing products or delivering services.

2. Indirect Procurement (or Indirect Sourcing)

Description: Refers to goods and services purchased that are not directly used in the production process but are essential for the company's day-to-day operations. These are typically for support functions.
Examples: Office supplies, IT services, marketing services, cleaning services, and travel.
Purpose: Helps support business operations and enhances productivity, but is not directly involved in creating products or services.

3. Capital Procurement

Description: Focuses on purchasing high-value items that are usually long-term investments or assets for an organization.
Examples: Real estate, machinery, vehicles, large infrastructure projects.
Purpose: Ensures that the organization acquires significant assets that support long-term growth and development.

4. Services Procurement

Description: Involves procuring services rather than physical goods. This may include outsourcing or contracting for a range of services that the organization requires.
Examples: Consulting services, legal services, facility management, staffing services, IT support.
Purpose: Supports organizational functions that cannot be managed in-house, often to reduce costs, gain expertise, or focus on core activities.

5. Strategic Procurement

Description: This type of procurement focuses on long-term planning and the development of relationships with suppliers. It aligns with the organization's strategic objectives and aims for optimal sourcing decisions that support future business growth.
Examples: Developing long-term supplier partnerships, negotiating global contracts, or sourcing critical technology.
Purpose: Helps organizations secure a competitive advantage through better supplier collaboration, improved innovation, and better risk management.

6. Tactical Procurement

Description: Focuses on short-term, operational purchases based on the immediate needs of the organization. Tactical procurement is more reactive and short-term in nature compared to strategic procurement.
Examples: Purchasing materials for a short-term project, fulfilling urgent needs, or procuring office supplies.
Purpose: Ensures immediate needs are met with a focus on efficiency and cost-effectiveness.

7. E-Procurement (Electronic Procurement)

Description: Involves using digital platforms and systems to manage the procurement process. It can automate much of the procurement cycle, from identifying suppliers to issuing purchase orders and receiving invoices.
Examples: Using procurement software, online supplier portals, or electronic invoicing systems.
Purpose: Streamlines the procurement process, increases efficiency, reduces errors, and offers better control over spending.

8. Global Procurement

Description: Refers to sourcing goods and services from international suppliers, often in different countries, to take advantage of global markets.
Examples: Sourcing raw materials from low-cost countries, establishing global supplier relationships for mass production.
Purpose: Enables businesses to access resources that might not be available locally, reduce costs, or take advantage of global innovation and expertise.

9. Sustainable Procurement

Description: Focuses on obtaining goods and services that minimize environmental impact and are socially responsible. It is driven by a desire to promote sustainability.
Examples: Purchasing eco-friendly materials, working with suppliers who have sustainable practices, or buying fair-trade goods.
Purpose: Ensures that the procurement process contributes to a company’s sustainability goals, reducing its environmental footprint and supporting ethical business practices.

10. Public Procurement

Description: Refers to the procurement process used by government organizations or public sector entities. It is often regulated by strict rules and guidelines to ensure transparency, competition, and accountability.
Examples: Government contracts for construction, technology, or consulting services.
Purpose: Ensures that taxpayers' money is spent responsibly, and that procurement processes are fair, open, and efficient.

11. Reverse Procurement (Reverse Auction)

Description: This is a type of procurement where suppliers compete to offer the lowest price for goods or services. The buyer initiates the process by specifying their requirements, and suppliers bid to win the contract.
Examples: Online bidding for construction projects, bulk purchasing of materials.
Purpose: Aims to achieve cost savings by encouraging competition and reducing the procurement cost.

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Type of PO in Oracle Fusion

1. Standard Purchase Order (PO)

Description: The most common type of PO, used for acquiring goods and services on a one-time or recurring basis. It is typically used when the terms (price, delivery, etc.) are agreed upon before the order is placed.
Use Case: Used when the company knows the exact items and services to be purchased, and the quantities and pricing are fixed or agreed upon.
Example: Purchasing raw materials or office supplies from a supplier.

2. Blanket Purchase Agreement (BPA)

Description: A long-term agreement between the buyer and the supplier to provide goods or services at predetermined prices, with delivery occurring as needed over time. A Blanket Purchase Agreement is typically used for high-volume or recurring purchases.
Use Case: Suitable for ongoing purchases or when an organization expects to make frequent purchases from the same supplier over a period.
Example: A company entering into an agreement with a supplier to provide stationery over a year.

3. Procurement Contract Purchase Order

Description: This PO type is used in conjunction with a Procurement Contract, where the terms of the agreement are negotiated and formalized in the contract. The PO is based on the conditions of the contract.
Use Case: Used when the procurement is part of a larger, more formal contract agreement between the supplier and the buyer.
Example: A company might enter into a contract with a supplier for specific terms (price, delivery schedule, etc.), and the POs are raised against this contract.

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How can we enable the AI and RedWood Purchase Order page

Step 1

Manage the administrator profile

Access the new Purchase Orders page, you must enable the Redwood Page for Purchase Orders Enabled for Purchasing (ORA_PO_PURCHASE_ORDERS_REDWOOD_ENABLED)