There are some cases where a company does not keep a product in inventory but it is manufactured or purchased when a customer makes an order. So when the user confirms a sales order,  a Procurement order will be created for the same quantity of goods. The procurement order will run automatically and it will create a purchase order or manufacturing order accordingly. The procurement order fetches the quantity and product from the sale order line for creating manufacturing/Purchase orders. There will be an individual procurement order for each sale order line.

With this strategy, companies only make enough product to fulfil customer’s orders;  thus reducing inventory levels and the cost of carrying and storing goods. However, one major disadvantage of procurement mechanism is that system is that it is highly possible to run into ordering dilemmas, such as a supplier not being able to get a shipment out on time. This leaves the company unable to fulfil the order and contributes to customer dissatisfaction.

How to set procurement Rules

Procurement rules are part of the routes.Go to the Inventory>Configuration ‣ Settings and tick “Advanced routing of products using rule“.

In a typical ERP settings,  the ‘sales user’ may not be aware of Stock in hand and ‘purchase user’ may not be aware of the sales.  So, only the warehouse user will be aware of exact stock in the inventory.

Let’s examine the process with the help of an example.  Here I am going to sale an iPhone 7 64gb gold using procurement route.  Let’s see what will happens once we set up procurement using routes.

First We have to set the route as Make To Order  in product form

If the Procurement method is “Make to Order” then we don’t need to care about the stock, the system will generate the Purchase order automatically when a new sales order is created. But make sure that the supplier name is assigned in product form. If many suppliers are assigned in the form, then the supplier with less sequence number will be used in the purchase order.

In other words, procurement links two different orders which transfer the stock from one location to another location.

It can be for Sale order to purchase order, or Sale Order to Manufacturing Order, or Manufacturing order to purchase order.