Use purchasing policies
A purchasing policy is a collection of purchasing policy rules that control the requisition process. Purchasing policies help procurement administrators implement their procurement strategy by creating a policy structure that aligns with the organization's strategic purchasing needs.
Purchasing policy rules and signing limits
Policy rules apply to organizations. Application logic retrieves the purchasing policy rules that are applicable to the purchase requisition based on the buying legal entity and the receiving operating unit that is stated on the purchase requisition line.
The Buying legal entity is a mandatory field on the purchase requisition line; the Receiving operating unit is optional. The application defaults the buying legal entity from the requester's employment.
For an employee to request products, it is mandatory that they are employed in the receiving operating unit; the assigned position that the employee holds within the unit is optional.
The preparer of the purchase requisition can change values in the requisition, providing the requester has permission to request in different organizations.
The buying legal entity is the first organization that is passed into the policy rule lookup; if the system does not find a policy rule based on the buying legal entity, it will try to retrieve a policy rule that applies to the receiving operating unit. If this also does not yield a policy rule, then no purchasing policy rule applies.
The creation of purchasing policies is controlled through the Enable procurement process duty parameter which, out of the box, is assigned to the purchasing manager role. Based on the business requirements of the company, the purchasing manager defines any number of purchasing policies.
A policy only governs the organizations to which it applies. The real application behavior configuration is achieved by implementing policy rules within a policy and setting the parameters that you want.
Purchasing policies are optional. All procurement functionality will work without a single purchasing policy being defined. In the absence of specific purchasing policies, the application will assume default behavior. The reason for this is to help avoid making the finance and operations implementation more complex by requiring that policies are set up at the beginning. Instead, the system lets you start up and run with default behavior until you are ready to configure the specific policies that govern the purchasing process.
The following list describes the default behavior for each of the purchasing policy rules, as if no rule applies. For example, either no rule of this type is implemented, or no policy applies to the organization for which the request is made.
- Catalog policy rule - The purpose of this rule is to set the procurement catalog to be used within an organization. The procurement catalog defines the presentation layer on the procurement site and the products that are available for purchase requests.
- Category access policy rule - The purpose of this rule is to restrict employees' access to certain procurement categories within an organization.
- Category policy rule - The purpose of this rule is to differentiate application behavior for specific procurement categories.
- Purchase requisition control rule - The purpose of this rule is to configure basic purchase requisition behavior.
- Purchase requisition request for quotation (RFQ) rule - The purpose of this rule is to configure when requests for quotations are required. Specific thresholds can be set for each procurement category. If a request for quotation is required, the purchase requisition line will be flagged accordingly so that the appropriate action can be taken during the review process.
- Purchase order creation and demand consolidation rule - The purpose of this rule is to configure the application behavior when processing approved purchase requisition lines into purchase orders. This includes error handling (for example, when prices have increased or vendors are blocked), automatic versus manual purchase order creation, and demand consolidation.
Policies
Many different types of policies exist, such as purchasing, expense, invoice, audit, and signing limit. Policies help define rules to manage the business and to enforce compliance with defined organizational rules for purchasing, expense, and other business activities. Policies are enforced at the time of the transaction.
Two primary elements comprise a policy: organizations and rules.
Policy organizations
You can use policies to define rules that apply to all or part of your organization. The organizations that a policy applies to are selected nodes from an organization hierarchy. The Companies hierarchy is automatically created. You can create other hierarchies by using the Organization hierarchy purposes page.
The purpose of the organization hierarchy must match the policy type. You can use the organizational hierarchy type Procurement internal control for Purchasing policies, and for the organizational hierarchy type Signature authority internal control, use the Signing limit policies.
Policy types
Supply Chain Management provides appropriate policy rule types for each policy type out of the box. Each policy rule is used to control different types of documents or transactions.
Developers can create additional policy rule types if required.
Limits
You can create signing limits to enforce spending and approval limits that are set up for your organization.
For example, you can create a signing limit policy with two default signing limit rules. For employees with a compensation grade of 22, 23, and 24, you could set the spending limit at USD 500. However, for employees at level 25 and above, you could set the spending limit at USD 5,000. These spending limits regulate spending as appropriate for employees based on their compensation level and the company that they belong to.
Use the Signing limit policy page to define the default signing limit rules for a selected organization node, such as a company. You can create default signing limit policies for each job or compensation grade in the organization node, depending on the signing limit basis that you have defined on the Signing limit parameters page.