This About description will begin with a brief overview of the purpose and the area of use for the supplier agreement. Then follows a more detailed description of each type of supplier agreement, i.e., the purchase agreement and the blanket purchase order. Finally, significant terms and concepts related to the supplier agreement in IFS/Purchasing are explained.
To avoid any uncertainty regarding the usage of supplier agreement terms in this about description, either supplier or supplier agreement is used as an overall concept (regardless of which type of supplier agreement). If references are made to a specific type of supplier agreement, such as a purchase agreement or a blanket purchase order, the description is only valid for this specific type.
The handling of supplier agreements is a supporting process to the procurement process in all companies. A supplier agreements entered in IFS/Purchasing will assist you in keeping the agreed business matters in order.
The supplier agreement can be used for both large agreements that a mother company sets up for the whole group in a multinational company, as well as for a supplier agreement that a small site has with a local supplier. By choosing from among the different options, such as defining time periods, using multiple sites, adding purchase parts and/or supplier assortments, and possibly using part step pricing and supplier assortment step pricing, there is a variety of opportunities for entering the supplier agreements.
There are two main different kinds of supplier agreements: purchase agreements and blanket purchase orders.
The purpose of a purchase agreement is to make an agreement with a supplier about general conditions and prices for a given period of time. This is done by entering the agreed information into the system. The purchase agreement in the system will, when entered, serve in the background and as a basis for the price on the purchase order lines.
A purchase agreement is a general supplier agreement that will be used for all applicable purchase order lines, i.e., all manually and automatically entered purchase orders. The only exceptions are the supplier agreement releases (which use blanket purchase orders) and purchase orders created from an order quotation (with the agreed terms from the order quotation to be used for the purchase order line). A purchase agreement will, of course, only be used if it is in a status that allows purchasing for the applicable purchase order line.
If you are using IFS/Project Delivery or IFS/Project, it is possible to enter a request for quotation in that module and then create a purchase agreement from it. In the purchase agreement, you will then see the project identification. A purchase agreement with a project reference can only be used for purchase orders that are connected to the project.
A blanket purchase order is a long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. The purchases of the specified purchase parts are already authorized. This fact makes it a very fast way of ordering the parts, since it reduces the steps necessary before the purchase order can reach the supplier.
The blanket purchase order is the type of supplier agreement which is used for supplier agreement releases. This concept gives the average user the possibility to buy items that can be very expensive; however, at the same time, it sets limits to the opportunity to buy indiscriminately. An example is the need to immediately purchase a very expensive spare part for a machine in order to minimize the time the machine is inoperable.
On a blanket purchase order it is only possible to enter purchase parts, not supplier assortments. The reason for this lies in the fact that a blanket purchase order defines precisely the purchase parts to be included and the buying conditions of these. A supplier assortment is too broad a definition to be applied in a blanket purchase order.
The average user can, when the blanket purchase order is created, easily create the supplier agreement releases from the Create Agreement Releasedialog box. This is the only way to make the supplier agreemen releases. The supplier agreement release will automatically create a released purchase order with one order line. No confirmation will be needed for this kind of purchase order since your company already has negotiated the details in the blanket purchase order with the supplier.
A supplier agreement can have the following statuses: Planned, Negotiate, Active, Closed, and Canceled.
When a supplier agreement is first created, it will be given the Planned status. After that it is possible to alter the status to Negotiate, Active, or Closed without any restrictions, depending on the workflow of the supplier agreement. However, once a supplier agreement has been canceled and has Canceled status, you cannot alter it further.
Normally, the system administrator initially sets the supplier agreement statuses that allow purchasing against the supplier agreement. The statuses that allow purchasing are set up as basic data in IFS/Purchasing. As default, the supplier agreement will be used when in Active status but can be changed to be allowed for all statuses but the Canceled status.
This concept is used since it is possible to enter a supplier agreement for more than one site. The owning site means the site that is responsible for the supplier agreement. As default, the user's default site is entered, but this value can be changed before saving the supplier agreement.
A supplier agreement can be either a local agreement or a group agreement. A local agreement is only valid for the owning site, and the value of this site is automatically entered in the supplier agreement. A group agreement can be valid for multiple sites, and the owning site does not have to be included. The person entering the supplier agreement must have access to all sites that are to be included in the supplier agreement.
If you want a local agreement for a site other than the owning site, you can use the group agreement functionality and enter only one site as the valid site.
The period is the basis for:
The cumulative values for each purchase part and for each supplier assortment are stored in connection to the applicable step pricing.
You can define one or several periods for which the supplier agreement is valid. You enter a start and an end date, as well as a maximum amount for the supplier agreement. How this maximum amount is used is explained in the paragraph about maximum quantity/amount. (See below.) You can also see the current amount of all purchases during the period.
An entered period does not need to have an end date. If no end date is entered, the supplier agreement will be valid until further notice. Before a new period is entered, the previous period must have an end date, i.e., the periods cannot overlap each other in time. It is possible to enter periods that are not connected in time. Another way of ending a valid supplier agreement is by changing the status of the supplier agreement to one that does not permit purchasing.
Note: It is not possible to delete a period once you have purchased against the supplier agreement.
The maximum amount (or the purchase parts' entered maximum quantity) can be regarded in two different ways. Either you consider the maximum amount as a guideline for how much you are going to buy from the supplier, or you consider it as a limit which you must not exceed.
If you consider the maximum amount as a guideline, you have two options for how the system will react when the amount is reached.
On the other hand, if you consider the maximum amount as a limit that is not to be exceeded, you will have no alternatives. If you try to enter a purchase order line that exceeds the maximum amount/quantity, it cannot be saved until the amount/quantity has decreased and no longer exceeds the maximum amount/quantity. (Do Not Exceed)
The Maximum Amount Option parameter is set in the main window, and the options are in the above described order: Exceed With Warning, Exceed Without Warning, and Do Not Exceed. There is one maximum amount for every specified period in the supplier agreement, a maximum quantity for each part line, and a maximum amount for each supplier agreement assortment line (the quantity is converted into an amount by multiplying the quantity by the price and deducting any discounts.)
It is possible to use either the date when the purchase order is created or the wanted delivery date as the date which the supplier agreement is to use.
This parameter will determine whether you should use the order date (the purchase order's create date) when finding the supplier agreement price or whether you should use the wanted delivery date specified on the purchase order line. This is done because you might want to enter purchase orders in advance without sending them to the supplier yet. It is possible that a new supplier agreement period will be valid when the parts are due to arrive that is different from the one valid on the entry of the purchase order. The price effective date parameter is defined for each supplier.
It is possible to connect purchase parts both to a purchase agreement and to a blanket purchase order. The purchase part must be entered as a purchase part on at least one of the sites in the supplier agreement. When entering parts to the supplier agreement, all units of measure and conversion factors must be the same on all sites where the part is entered, i.e., the purchase unit of measure and the conversion factor between the purchase and inventory unit of measure must be identical, as well as the price unit of measure and the conversion factor between price and purchase unit of measure. This consistency must be fulfilled, otherwise, it is functionally impossible to enter the purchase part in the supplier agreement.
If you wish to enter a supplier agreement with five different sites and two parts, you only need to enter the information once.
The information could be entered in this format:
| Supplier agreement with general conditions and periods | Site A | Part 1, conditions |
| Site B | Part 2, conditions | |
| Site C | ||
| Site D | ||
| Site E |
The information that you must enter is not nearly as much as when you must have separate supplier agreement for all sites. All these sites could be entered in the same supplier agreement if using group agreement functionality. In this manner, you only need to enter the purchase parts once, if they are valid with the specified conditions for all sites.
The supplier agreement is now possible to use for purchasing of the parts on all sites.
Note: Before buying a part to a site, the part must be entered as a purchase part on that site.
It is possible to specify for purchase parts that they are only valid for one specific site. If a part is entered for a specific site, it is possible to enter more lines for the same part. The only restriction is that the part in this case must be valid for another site or for all other sites. A line with a specified site will always be used before a line without the site specified when retrieving prices for a purchase order line. The example below is an extension of the example with entering sites and parts.
| Site | Part | Price | Discount (%) | Additional Cost | Maximum Qty |
| Part 1 | 32.50 | 0 | 0 | 5000 | |
| Site A | Part 1 | 30.75 | 0 | 0 | 3000 |
In this case, site A will pay 30.75 per unit, whereas all other sites (site B, site C, site D, and site E) will pay 32.50 per unit. The reason for the different prices could be that site A is located much closer to the supplier than the other sites.
You can enter the agreed price, discount, and additional cost. The additional cost is a cost that you must pay for the purchase order line independent of the quantity ordered.
If you receive better pricing conditions, depending on how much you have bought, it is recommended to use part step pricing. This functionality keeps track of how much you have bought of a specific part and what conditions you should receive for your purchase order line. You specify if the price list should be valid for one specified site or for all sites entered in the supplier agreement. When using part step pricing, it is possible to receive a different price, discount, and additional cost when you have purchased a specified minimum quantity. This information can also be received from the supplier in a price catalog message. Read more about price catalog messages in the paragraph Receiving Price Information via EDI/MHS.
The conditions retrieved to the purchase order line are those applicable to the quantity that is reached with the current order line included. For instance, the current cumulative quantity is 800 pieces, the next level for new conditions is 1000 pieces. If you place an order for 250 pieces, the conditions for a quantity of at least 1000 pieces (800+250>1000) will be retrieved. The cumulative quantity is now 1050 pieces.
A part step pricing could look as follows:
| Part | Min Qty | Price | Discount (%) | Additional Cost |
| Part 1 | 0 | 6.75 | 0 | 0 |
| 1000 | 6.50 | 0 | 0 | |
| 1500 | 6.10 | 0 | 0 |
When you want to perform a follow-up on how much you have bought of a specific purchase part from a supplier, you can see the cumulative values in connection to the part step pricing. You do not need to use part step pricing to have the cumulative values updated here. Current quantity, current amount, and the number of purchase order lines can be viewed. The values are specified for each period of the supplier agreement.
When an invoice is matched to a received purchase order line connected to a supplier agreement, the cumulative amount and quantity will be updated for the part on the supplier agreement and the part step pricing. Matching price adjustment invoices to a purchase order line connected to a supplier agreement will update the cumulative amount for the part on the supplier agreement and part step pricing. Both types of invoice matching will also update the cumulative amount for the entire supplier agreement.
The supplier assortment can only be connected to a purchase agreement and not to a blanket purchase order. Supplier assortments are used in purchase agreements for grouping parts having similar conditions regarding discounts and additional costs, including inventory registered purchase parts, non-inventory registered purchase parts, and no-number parts. One advantage with the supplier assortment concept is that you can use one purchase part even though you have several suppliers for the part and the suppliers can give you different discounts and additional costs.
A supplier assortment should only be used for connecting purchase parts and/or no-number parts to one (1) supplier. The supplier assortments are set up as basic data in IFS/Purchasing and are then used as a connection for the combination of the purchase part and its supplier. Supplier assortments can never be site specific; they are valid for all sites entered in the purchase agreement.
As an example, consider the white paper used for laser printing. When your company buys this paper, you normally buy it from a retailer. In his case, it is part of his office supply assortment and you have a 20 percent discount on all products included in that supplier assortment. However, due to the fact that this retailer always keeps a low stock to minimize costs and unsold parts, it sometimes happens that he is out of stock on this product. (That is why you have such a big discount.) In this event, you must purchase the same product (the white laser paper) from a different retailer who is better stocked with these parts. In his case, this part is included in his laser printer paper assortment; since his assortment is much larger and is better stocked, you have no discounts at all from him.
The control type C82 (Supplier Assortment) can be used in connection with the following posting types:
A supplier agreement assortment can also be connected to supplier assortment step pricing, in which case it is called supplier assortment step pricing. The same restriction as in the normal purchase agreement exists; it is not possible to have site-specific supplier assortment step pricing. It is not possible to enter a quantity since an assortment can contain parts that differ in unit of measure and other aspects. It is however possible to enter a minimum amount.
For the minimum amount you enter the discount the supplier gives you, as well as the additional cost for each ordered line. When retrieving the discount and the additional cost for a supplier assortment, the amount on the current order line is considered. The amount is first calculated using the discount and the additional cost for the step matching the cumulative amount before placing the order line. If the cumulative amount reaches the next step in the step pricing the values (for discount and additional cost) for this step will be used in the current purchase order line.
A short example will clarify the retrieval of terms for supplier assortments, using a supplier assortment called Supplier Assortment 1 (SA1). SA1 is entered on a supplier agreement and the assortment step pricing is displayed in the table below.
A supplier assortment step pricing could look as follows:
| Supplier Assortment | Min Amount | Discount (%) | Additional Cost |
| Supplier Assortment 1 (SA1) | 0 | 0 | 10 |
| 500 | 10 | 10 | |
| 1000 | 20 | 10 |
When you want to make a follow-up on how much you have bought of a supplier agreement assortment from a supplier, you can see the cumulative values in connection to the supplier assortment step pricing. You do not need to use supplier assortment step pricing to have the cumulative values updated here. The current amount and the number of purchase order lines can be viewed. The values are specified for each period of the supplier agreement.
When an invoice is matched to a received purchase order line, with a defined supplier assortment connected to a supplier agreement, the cumulative amount will be updated for the supplier assortment on the supplier agreement and the assortment step pricing. Matching price adjustment invoices to a purchase order line, with a defined supplier assortment connected to a supplier agreement, will update the cumulative amount for the supplier assortment on the supplier agreement and assortment step pricing. Both types of invoice matching will also update the cumulative amount for the entire supplier agreement.
Since a purchase part can be entered directly, or indirectly, in four different places in a supplier agreement, the order in which the conditions for a purchase order line is retrieved must be specified. The possible places are as a part, included in a part step pricing, included in a supplier assortment, and included in a supplier assortment step pricing. Moreover, purchase parts can be both site-dependent and site-less.
As a conclusion, one might say that site-dependent always is chosen before site-less and that step pricing is chosen before the normal supplier agreement.
To simplify the separation of the different supplier agreements, you have the opportunity to enter your own supplier agreement groups. This is entered as basic data in IFS/Purchasing. The supplier blanket types entered can be used on both purchase agreements and blanket purchase orders. The type can then be used when grouping and querying for supplier agreements.
The possibility of receiving a supplier agreement reference in the price catalog message makes it possible to update an existing supplier agreement with the price information sent. It is possible to update the conditions for a purchase part in both blanket purchase orders and purchase agreements.
Since the price catalog message treats the date periods differently from the supplier agreement, it is not possible to automatically update a supplier agreement. This is due to the fact that a price catalog line can have valid from and valid until dates, whereas the supplier agreement only uses dates on the header. It is not possible to update a supplier agreement with a price catalog message (referring to a supplier agreement) that contains prices for some parts (prices that will be valid in the future), since it is not possible to specify this information on the supplier agreement.
If the supplier sends the price catalog message (the PRICAT message) in advance (very likely), the price catalog must be approved on the very day when the prices specified in the price catalog should start to be used (or later).