What happens when someone at work needs a new laptop, raw materials for production, safety equipment, consulting services, or even a cleaning contract? In many organizations, purchasing still involves emails, spreadsheets, approval messages, vendor quotes, delivery notes, and invoices spread across different systems. Dynamics 365 Procurement and Sourcing connects these activities into one controlled source-to-pay process. In this episode of M365 FM, Mirko Peters explains how Dynamics 365 Supply Chain Management connects purchase requisitions, sourcing, vendors, RFQs, purchase orders, receiving, invoice matching, approvals, Accounts Payable, and vendor payments. WHAT IS DYNAMICS 365 PROCUREMENT AND SOURCING? Procurement and sourcing are closely related, but they describe different parts of the purchasing process. Sourcing focuses on finding and selecting the right vendor. The organization considers products, prices, delivery dates, terms, discounts, and the vendor's ability to meet its requirements. Procurement manages what happens when the organization actually buys something: the request, approval, purchase order, receipt, invoice, and eventually payment. Together, these activities create the source-to-pay process. SOURCE-TO-PAY EXPLAINED Source-to-pay describes the complete journey from identifying a business requirement to paying the supplier. The organization identifies what it needs, finds or selects an appropriate vendor, creates an order, receives the goods or services, processes the vendor invoice, and eventually pays the supplier. The individual steps aren't particularly unusual. The value comes from keeping them connected. Instead of approvals disappearing into email and invoices arriving without context, Dynamics 365 maintains the purchasing trail from the original request through payment. DIRECT VS INDIRECT PROCUREMENT Businesses typically purchase two broad categories of goods and services. Direct procurement covers goods or services directly connected to what the company produces or sells. A furniture manufacturer purchasing wood, screws, and fabric is buying direct materials. Indirect procurement covers products and services required to operate the business but which don't become part of the finished product. Examples include laptops, office furniture, training, repairs, cleaning, software, and legal services. Dynamics 365 can support both types while maintaining controlled purchasing processes. PURCHASE REQUISITIONS A purchase requisition is an internal request to buy something. An employee can specify what is required, the quantity, and potentially where the purchase should be delivered. Importantly, the requisition doesn't yet create a commitment with a vendor. That gives the organization an opportunity to review the requirement, check budgets, apply purchasing policies, and obtain the appropriate approvals before money is committed. PROCUREMENT CATALOGS Common purchases can begin through procurement catalogs. Think of the catalog as the organization's approved internal shopping shelf. Instead of somebody entering a vague request for "safety gloves," employees can select an approved product with an established description, supplier option, and price. Catalogs simplify purchasing for employees while helping the organization guide demand toward products and suppliers it already understands. PROCUREMENT CATEGORIES Not every purchase belongs in a product catalog. Organizations also purchase consulting, repairs, training, legal services, and other requirements that might not have a traditional item number. Procurement categories allow these purchases to be classified according to what the organization is buying. Examples could include safety supplies, computer equipment, professional services, building repairs, or training. This allows purchasing controls and spend analysis to work even when the purchase isn't a physical inventory item. APPROVAL WORKFLOWS A purchase shouldn't automatically proceed simply because somebody requested it. Dynamics 365 can use approval workflows, spending limits, purchasing policies, and budget controls to determine who needs to review a request. A small purchase might require one manager's approval. A larger expenditure could additionally require a budget owner or purchasing manager. The approval path can depend on factors such as amount, department, category, and company policy. Dynamics 365 records those approvals as part of the purchasing history. REQUEST FOR QUOTATION When the organization hasn't already selected a supplier, purchasing can create a Request for Quotation, commonly called an RFQ. Several vendors can receive the same requirements and provide their prices and commercial terms. One vendor might offer the lowest price but require three weeks for delivery. Another might cost slightly more but deliver next week. Dynamics 365 keeps those responses connected with the sourcing process so buyers can compare options before making a decision. VENDOR MANAGEMENT Vendor records contain information required for the organization's purchasing relationship with suppliers. Vendor catalogs can describe products available from particular suppliers, while approved vendor lists can identify which suppliers are permitted for specific products. This helps organizations control where employees and buyers purchase goods. Instead of choosing a supplier simply because somebody found one online, the purchasing process can guide users toward vendors the organization has already approved. PURCHASE AGREEMENTS A purchase agreement records longer-term commercial arrangements between the organization and a vendor. For example, the business might agree to purchase a particular quantity or spend a certain amount over an established period in return for agreed commercial terms. When purchases occur under that agreement, buyers don't need to renegotiate the complete arrangement every time. This is particularly useful for frequently purchased goods and strategic vendor relationships. TRADE AND REBATE AGREEMENTS Trade agreements can record vendor prices or discounts that apply during particular periods. If a supplier agrees to provide safety gloves at a discounted price for six months, Dynamics 365 can maintain that pricing arrangement. Rebate agreements address another scenario: the supplier returns money when agreed purchasing quantities or spending thresholds are reached. Together, these capabilities help organizations maintain negotiated commercial conditions within the purchasing process instead of relying on individual buyers to remember them. THE PURCHASE ORDER Once the organization knows what it needs and who will supply it, the purchasing decision becomes a Purchase Order, or PO. The purchase order formally describes what the organization intends to buy. It identifies the vendor, products or services, quantities, prices, delivery requirements, and payment terms. The PO becomes the central commercial record that purchasing, warehouse employees, finance teams, and the supplier can work against. HOW PURCHASE ORDERS ARE CREATED Purchase orders can originate from several sources. An approved purchase requisition can become a PO. A buyer can release purchases against an existing purchase agreement. Planned demand can create planned purchase orders that later become real orders. Buyers can also manually create purchase orders when they already know exactly what needs to be purchased and which supplier should provide it. Different purchasing scenarios can therefore enter the process differently while ultimately creating the same controlled purchase record. PURCHASE ORDER APPROVAL AND CONFIRMATION The organization can require internal approval before a purchase order becomes an external commitment. This separates two important decisions. First, the organization approves spending its own money. Then the purchase order can be confirmed with the vendor, establishing the agreed products, quantities, prices, delivery dates, and terms. This creates a clearer purchasing process than sending an order externally before the appropriate internal approval has occurred. DELIVERY SCHEDULES Not every purchase order arrives in one delivery. A supplier might deliver part of an order immediately and the remainder the following week. Delivery schedules allow one purchase order to contain planned deliveries across multiple dates. The organization maintains one connected purchasing record while representing what is actually expected to happen operationally. DIRECT DELIVERY Some purchased goods never need to enter the organization's own warehouse. With direct delivery, a supplier ships products directly to the organization's customer. Dynamics 365 can connect the customer sales order with the corresponding vendor purchase order. This eliminates an unnecessary warehouse stop while maintaining the relationship between the customer demand and the supplier fulfilling that demand. SUPPLEMENTARY ITEMS AND CHARGES Purchase orders can contain more than the primary item being purchased. Dynamics 365 can suggest supplementary products that may be required, optional, or included with another item. Charges such as freight and handling can also be associated with the purchase order or individual lines. This matters because the advertised product price doesn't necessarily represent the complete purchasing cost. Keeping additional charges connected to the order provides a clearer view of what the purchase actually costs. Become a supporter of this podcast: https://www.spreaker.com/podcast/m365-fm-modern-work-security-and-productivity-with-microsoft-365--6704921/support.
