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SAP Outline Agreement Process

SAP Outline Agreement Process

Outline agreements are long-term arrangements with vendors to supply goods under specific conditions, providing better negotiation terms and streamlining procurement processes.

Overview
Contracts
Scheduling Agreements
Process Flow
SAP Transactions

What are Outline Agreements?

Outline agreements are long-term arrangements between a company and vendors to provide goods or services under specific terms and conditions over a period of time. They help establish better pricing and terms based on committed volumes or values.

Key Benefits of Outline Agreements:
  • Better negotiated prices based on committed volumes
  • Improved payment and shipping terms
  • Reduced administrative effort for recurring purchases
  • Streamlined procurement processes
  • Better vendor relationships through long-term commitments

Types of Outline Agreements

Contracts

Contracts are agreements where you commit to purchasing a specific quantity or value from a vendor over a defined period, obtaining better terms in return.

Quantity Contract

Commitment based on total quantity to be purchased (e.g., 50,000 pounds of coffee at $9/pound instead of regular $10/pound)

Value Contract

Commitment based on total value to be purchased (e.g., $500,000 worth of various goods with specific negotiated prices for each item)

Scheduling Agreements

Scheduling agreements are similar to contracts but include specific delivery schedules, eliminating the need to create purchase orders for each delivery.

Ideal for:

  • Regular, predictable procurement needs
  • Just-in-time delivery requirements
  • Manufacturing environments with consistent component needs
  • Reducing administrative workload for recurring purchases

Purchasing Approaches

Centralized Purchasing
✓
One purchasing organization handles procurement for multiple plants/locations
✓
Higher volumes lead to better negotiating position
✓
Consistent vendor relationships across the organization
✓
Reduced administrative overhead
✓
Better for conventional industries where volume discounts apply
Decentralized Purchasing
✓
Different purchasing organizations for different locations
✓
More responsive to local needs and requirements
✓
Better for specialized or niche industries
✓
Local relationships with vendors
✓
More autonomy for regional operations

Contract Types in SAP

Feature Quantity Contract Value Contract
Basis of Agreement Total quantity to be purchased Total value to be purchased
Commitment Example 50,000 pounds of coffee $500,000 worth of various items
Pricing Fixed price per unit based on quantity commitment Different prices for different items based on value commitment
Tracking in SAP Tracks released quantity against target quantity Tracks released value against target value
Best for Single item with high volume requirements Multiple items from the same vendor
Creating a Quantity Contract

To create a quantity contract in SAP:

  1. Navigate to ME31K (Logistics > Material Management > Purchasing > Outline Agreements > Contract)
  2. Enter the vendor code and select agreement type "Quantity Contract"
  3. Set validity dates for the contract
  4. Enter material, target quantity, and negotiated price
  5. Save the contract
Quantity Contract Example
Vendor:
4001 (ABC Foods)
Material:
Coffee Beans
Target Quantity:
50,000 pounds
Regular Price:
$10 per pound
Contract Price:
$9 per pound
Validity:
1 year
Creating a Value Contract

To create a value contract in SAP:

  1. Navigate to ME31K (Logistics > Material Management > Purchasing > Outline Agreements > Contract)
  2. Enter the vendor code and select agreement type "Value Contract"
  3. Set validity dates for the contract
  4. Specify the target value at the header level
  5. Enter materials and negotiated prices (no quantities needed)
  6. Optionally set special payment terms at the header level
  7. Save the contract
Value Contract Example
Vendor:
4001 (ABC Foods)
Target Value:
$500,000
Payment Terms:
Net 60 (instead of standard Net 30)
Material 1:
Coffee Beans at $8.50 per pound
Material 2:
Sugar at $3 per pound (regular $4)
Validity:
1 year
Using Contracts in Purchase Orders

There are two ways to create purchase orders referencing a contract:

Method 1: Direct Reference in PO

  1. Create a regular purchase order using ME21N
  2. Enter the material and quantity
  3. In the "Outline Agreement" column, enter the contract number
  4. The system will automatically apply the contract price and terms
  5. Save the purchase order

Method 2: Contract Release Order

  1. Navigate to the contract in ME32K or ME33K
  2. Select "Follow-on functions" and "Contract Release Order"
  3. Either drag the contract to the shopping cart or select the contract and click "Adapt"
  4. Enter the release quantity
  5. Save the purchase order
Note: When you create purchase orders referencing a contract, SAP automatically tracks the released quantities or values against the target. You can view this information in the "Release Documentation" of the contract.

Scheduling Agreements

Scheduling agreements are similar to contracts but include specific delivery schedules, eliminating the need to create purchase orders for each delivery.

Key Features of Scheduling Agreements:
  • Specify exact delivery dates and quantities
  • No need for separate release orders (POs) for each delivery
  • Goods receipt done directly against the scheduling agreement
  • Ideal for regular, predictable procurement needs
  • Commonly used in manufacturing environments with just-in-time delivery requirements
Creating a Scheduling Agreement

To create a scheduling agreement in SAP:

  1. Navigate to ME31L (Logistics > Material Management > Purchasing > Outline Agreements > Scheduling Agreement)
  2. Enter the vendor code and agreement type (typically "Scheduling Agreement")
  3. Set validity dates for the agreement
  4. Enter material, target quantity, and negotiated price
  5. Specify the plant (required for scheduling agreements)
  6. Save the agreement
  7. Maintain the delivery schedule by selecting "Delivery Schedule" and "Maintain"
  8. Enter specific dates and quantities for deliveries
  9. Save the schedule
Scheduling Agreement Example
Vendor:
4001 (ABC Foods)
Material:
Coffee Beans
Target Quantity:
50,000 pounds
Price:
$9 per pound
Plant:
Chicago
Validity:
1 year
Delivery Schedule:
- 09/19/2016: 100 pounds
- 09/26/2016: 100 pounds
- 10/03/2016: 100 pounds
(weekly deliveries)
Using Scheduling Agreements

With scheduling agreements, you don't need to create purchase orders for each delivery. Instead:

  1. When the delivery date arrives, the vendor delivers the scheduled quantity
  2. You perform goods receipt directly against the scheduling agreement using MIGO
  3. Enter the scheduling agreement number
  4. The system shows the scheduled delivery for the current date
  5. Confirm receipt of the goods
  6. The system updates the scheduling agreement, changing the status from "Open" to "Goods Received"
Advantage: Scheduling agreements eliminate the need to create individual purchase orders for each delivery, making them ideal for regular, recurring procurement needs.
When to Use Scheduling Agreements

Scheduling agreements are particularly useful in the following scenarios:

  • Manufacturing environments: Where components are needed regularly for production lines
  • Just-in-time (JIT) delivery: When precise delivery schedules are critical
  • Recurring needs: When procurement follows a predictable pattern (e.g., weekly coffee deliveries)
  • MRP-driven procurement: In manufacturing environments with Material Requirements Planning
Note: While contracts offer flexibility to create purchase orders as needed, scheduling agreements commit to specific delivery dates. Choose the right type based on your procurement needs.

Outline Agreement Process Flow

1
Negotiation

Negotiate terms with vendor using Buyer's Negotiation Sheet

2
Agreement Creation

Create contract or scheduling agreement in SAP

3
PO Creation/Schedule

Create POs with reference to contract or set delivery schedule

4
Goods Receipt

Receive goods against PO or scheduling agreement

5
Invoice Verification

Process vendor invoice with reference to PO or agreement

1

Preparation and Negotiation

Before creating outline agreements, the purchasing manager prepares for negotiations:

  • Analyze procurement volumes and needs
  • Generate Buyer's Negotiation Sheet (ME49) showing history of purchases with the vendor
  • Negotiate better terms based on committed volumes or values
  • Determine appropriate agreement type (quantity contract, value contract, or scheduling agreement)
2

Create Outline Agreement

Create the appropriate type of outline agreement in SAP:

  • For Quantity Contract: ME31K with agreement type "Quantity Contract"
  • For Value Contract: ME31K with agreement type "Value Contract"
  • For Scheduling Agreement: ME31L with agreement type "Scheduling Agreement"
  • Specify validity period, items, quantities/values, and negotiated prices
  • For scheduling agreements, maintain the delivery schedule
3

Use the Agreement

Different ways to use the agreement depending on type:

For Contracts:

  • Create purchase orders referencing the contract
  • Method 1: Enter contract number in PO (ME21N)
  • Method 2: Use contract release order (ME21N via contract follow-on functions)

For Scheduling Agreements:

  • No purchase orders needed
  • Vendor delivers according to schedule
4

Goods Receipt

Receive goods against the purchase order or scheduling agreement:

  • For contracts: Create goods receipt against the PO (MIGO)
  • For scheduling agreements: Create goods receipt directly against the scheduling agreement (MIGO)
  • System updates the consumption of the agreement (released quantity/value)
5

Invoice Verification and Payment

Process vendor invoices with reference to the purchase order or agreement:

  • Enter vendor invoice (MIRO)
  • Reference the PO or scheduling agreement
  • System applies the negotiated prices and terms
  • Process payment according to negotiated payment terms
6

Monitoring and Reporting

Track the usage and performance of outline agreements:

  • Monitor released quantities/values against targets
  • View release documentation in the agreement (ME33K or ME33L)
  • Generate reports to analyze agreement utilization
  • Prepare for renewal or renegotiation as the agreement nears expiration
Important Notes:
  • The system automatically applies negotiated prices and terms when referencing outline agreements
  • Outline agreements can include not just better prices but also improved payment terms, shipping terms, etc.
  • The system tracks consumption (released quantities or values) against the target
  • SAP warns users if they create a standalone PO for an item that has an existing outline agreement

Key SAP Transactions for Outline Agreements

Transaction Code Description Used For
ME31K Create Contract Creating quantity or value contracts
ME32K Change Contract Modifying existing contracts
ME33K Display Contract Viewing contract details and release documentation
ME31L Create Scheduling Agreement Creating scheduling agreements
ME32L Change Scheduling Agreement Modifying existing scheduling agreements
ME33L Display Scheduling Agreement Viewing scheduling agreement details
ME21N Create Purchase Order Creating POs with reference to contracts
ME49 Buyer's Negotiation Sheet Generating purchasing history for negotiation
MIGO Goods Receipt Receiving goods against POs or scheduling agreements
MIRO Enter Invoice Processing vendor invoices

Finding Contracts

To find existing contracts in SAP:

  1. Use ME33K or ME33L
  2. Enter vendor number if known
  3. Specify purchasing organization (e.g., US01)
  4. Optionally enter material number
  5. Click Execute to see the list of matching contracts

Contract Monitoring

To monitor contract utilization:

  1. Display the contract using ME33K
  2. Check individual line items for released quantities
  3. Click "Release Documentation" button to see detailed release history
  4. View all purchase orders created against the contract
  5. See cumulative released quantities and values

System Warnings

SAP provides warnings to help users utilize outline agreements:

  • Warning when creating a standalone PO for an item that has an outline agreement
  • Notifications when an outline agreement is about to expire
  • Alerts when released quantities/values approach the target
  • Warnings for delivery date issues in scheduling agreements
$

Better Pricing

✓

Improved Terms

⏱

Time Savings

📊

Volume Benefits

🚚

Reliable Supply

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