One of the most frequent questions related to procurement processes is if a Purchase Requisition is a mandatory document and if a Purchase Order can be created directly whiteout being preceded by a Purchase Requisition,
There is no simple answer to this question so this blog will highlight the main areas to consider when deciding if the procurement business process should start with the creation of the purchase requisition or if the business can create the Purchase order whiteout with any reference to a Purchase Requisition.
So what is the Purchase Requisition and how does it differ from a Purchase Order?
A Purchase Requisition is an internal document that is created to request goods or services and sent to purchasing department for approval. Before approval, purchasing department should identify sources of supply in case no supplier was selected during the requisition process.
The purchase requisition is an important document as most of the customers will add the approval workflow at this level and this will ensure purchasing compliance. Skipping this level of approval might lead to an increasing number of questions from the audit department.
When the procurement process starts with a purchase requisition, after approval, the document is converted (either automatically or manually ) to a purchase order and sent to suppliers. A Purchase Order is an external, legal document that customers sent to suppliers to request goods and services.
Most organizations will start their procurement process with a purchase requisition and this process is in line with procurement best practices, especially in consumables purchasing where employees are empowered to create their own internal requests when they need any goods or services for operational purposes. This will ensure that the request will go via an approval process in line with the policies defined by each organization.
Some organizations might decide for production orders to allow a specific procurement persona-professional buyers to start the procurement process by directly creating the purchase order, and whiteout creating the purchase requisition.
Other organizations might use MRP to automate the process step of creating Purchase Requisitions.
In conclusion, the creation of a Purchase Requisition is a business decision and not a mandatory requirement for procurement, however, it is highly recommended to start the procure flow with the creation of a Purchase Requisition.
The above statement is mostly applicable for procurement systems such as SAP S/4HANA which allows the set-up of either starting the procurement process with a Purchase Requisition that will be later converted to a Purchase order or starting the procurement process directly by creating a Purchase Order.
In other procurement systems such as Ariba, the creation of a Purchase Requisition is mandatory as the system cannot be set up to skip this step. in Ariba Buying , the Purchase Requisition must be created so that the Purchase Order can be automatically generated.
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