11.1 Purchase Requisitions, Requests for Quotation (RFQs), and Bidding Processes

11.1 Purchase Requisitions, Requests for Quotation (RFQs), and Bidding Processes

Quick Answer: In Microsoft Dynamics 365 Supply Chain Management (D365 SCM), internal procurement demand initiates through Purchase Requisitions for Consumption (expensed operational goods/services) or Replenishment (warehouse inventory restocking), utilizing either Catalog items or non-catalog Procurement categories. Requisitions progress through a workflow state machine (Draft, In review, Approved, Rejected, Closed) governed by Signing limits and Purchasing policies. Approved lines can automatically generate purchase orders or be aggregated using the Demand consolidation workbench. For competitive sourcing, Requests for Quotation (RFQs) solicit bids across three document types (Purchase order, Purchase agreement, or Purchase requisition) via direct invitation or the Vendor Collaboration portal, where bids are captured, evaluated using weighted Scoring criteria, and awarded.

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1. Purchase Requisitions Architecture and Demand Intake

A Purchase requisition is an internal document authorizing the purchasing department to procure goods and services. Requisitions prevent uncontrolled organizational spending by requiring internal authorization before commercial commitments exist.

• Navigation: Procurement and sourcing > Purchase requisitions > Purchase requisitions prepared by me (or All purchase requisitions)

Requisition Purposes: Consumption vs. Replenishment

When creating a requisition header, the user selects a Requisition purpose, which strictly governs line behavior and downstream document conversion:

1. Consumption:
   • Intended for internal operational consumption (e.g., office stationery, employee laptops, third-party consulting, machine maintenance spares).
   • Goods are directly expensed upon receipt to an operating department, cost center, or project work breakdown structure (WBS).
   • Can utilize either Released products (catalog items) or Procurement categories (non-catalog lines).
   • Downstream conversion creates standard commercial purchase orders.
2. Replenishment:
   • Intended to restock warehouse inventory across distribution centers or production facilities.
   • Must specify Released products with valid inventory storage dimensions (Site, Warehouse).
   • Interacts directly with Master Planning; approved replenishment requisitions generate planned purchase orders or transfer orders.

Catalog Items vs. Non-Catalog Category Lines

Requisition lines handle two distinct procurement data structures:

• Catalog Items (Item lines):
  • Sourced from released products configured in Product Information Management and mapped to internal procurement catalogs.
  • Reference pre-defined item numbers, standard units of measure, approved vendor lists, trade agreement pricing, and item model groups.
  • Require physical inventory dimension tracking when received.
• Non-Catalog Category Lines (Category lines):
  • Used for one-off, ad-hoc, or service purchases where maintaining a formal released product master is impractical (e.g., legal advisory, facility cleaning, custom fabrication).
  • Sourced from the Procurement category hierarchy (Procurement and sourcing > Setup > Categories > Procurement categories).
  • Requesters specify a category node, free-text commodity description, unit of measure, requested quantity, and estimated unit price.
  • General Ledger distribution derives from the Category policy rules and inventory posting profiles mapped to the Purchase expenditure for expense posting type.

+-------------------------------------------------------------------------------------------------+
|                                 PURCHASE REQUISITION LINE TYPES                                 |
+------------------------------------+------------------------------------------------------------+
| Catalog Item Line                  | Non-Catalog Category Line                                  |
| • Released product ID required     | • Selected from Procurement Category Hierarchy             |
| • Default pricing from trade agmts | • Free-text item description and estimated unit price      |
| • Inventory transactions created   | • Expensed directly to P&L accounts (No item inventory)    |
| • Mandatory Site / Warehouse       | • Financial dimensions (Cost Center, Dept) set on line     |
+------------------------------------+------------------------------------------------------------+

Purchasing Policies and Catalog Access

Requisition behavior is governed by Purchasing policies (Procurement and sourcing > Setup > Policies > Purchasing policies):

• Catalog policy rule: Determines which procurement catalogs are visible to specific legal entities, operational units, or user roles.
• Category policy rule: Controls whether specific categories require matching purchase orders, allow receiving without POs, or enforce price tolerance thresholds.
• Requisition purpose rule: Dictates whether employees can submit replenishment requisitions or are restricted strictly to consumption.

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2. Requisition Lifecycle, Workflow Topologies, and Signing Limits

Purchase requisitions progress through a deterministic state machine managed by the workflow infrastructure:

[Draft] ---> (Submit) ---> [In review] ---> (Approve) ---> [Approved] ---> (Release) ---> [Closed]
                                 |                              |
                             (Reject)                      (Re-approve rule)
                                 v                              |
                            [Rejected] -------------------------+

Lifecycle Status Progression

1. Draft: The requisition is created and editable by the preparer. Line inventory transactions do not exist.
2. In review: Submitted to the workflow engine. The document is locked from interactive editing. Workflow evaluates approval conditions, managerial hierarchies, and signing limit policies.
3. Approved: All workflow approvers have signed off. Requisition lines are locked and eligible for conversion into purchase orders or RFQs.
4. Rejected: A designated approver rejects the document. The requisition returns to the preparer with reviewer audit notes. The preparer can modify details and resubmit or cancel the requisition.
5. Closed: All approved lines have been converted into purchase orders, fulfilled via internal transfers, or manually cancelled.

Workflow Topologies: Header vs. Line-Level Routing

Organizations deploy two complementary workflow types for purchase requisitions:

• Purchase requisition review workflow (PurchReqReview): Operates at the document header level. Orchestrates global submission, overall state management, and final approval.
• Purchase requisition line review workflow (PurchReqLineReview): Operates independently on individual lines within the requisition. Allows parallel, conditional routing: Line 1 (IT Hardware) routes to the Chief Information Officer, while Line 2 (Safety Equipment) routes to the Plant Health & Safety Director.

Signing Limits and Spending Authority

Approver authority is enforced using Signing limits (Organization administration > Setup > Signing limits > Signing limit parameters):

• Spending limit: Maximum monetary amount an employee can authorize on a requisition they author.
• Approval limit: Maximum monetary threshold an approver can approve for subordinates within their reporting hierarchy.
• If a requisition's net amount exceeds a manager's approval limit, the workflow engine automatically escalates the document up the managerial hierarchy until an executive with sufficient limit signs off.

[!IMPORTANT] Re-approval Rules: If an approved requisition is amended prior to purchase order generation, the Re-approval rule for purchase requisitions policy determines whether the document must re-enter the workflow. Configurable triggers include changes to net line amount, quantity, unit price, required date, or vendor account.

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3. Demand Consolidation and Automated Purchase Order Generation

Once requisitions attain Approved status, they must be converted into commercial purchase orders for vendor fulfillment.

Policy-Driven Automated PO Generation

Under Procurement and sourcing > Setup > Policies > Purchasing policies, open the Purchase order creation and demand consolidation rules policy rule:

• Automatically create purchase orders: When enabled, the workflow approval event immediately and automatically spawns purchase orders in the background without buyer intervention.
• Run automatic purchase order creation as a batch job: Schedules asynchronous processing to prevent user session timeouts during high-volume periods.

Manual Release and Demand Consolidation Workbench

When automatic creation is disabled or lines require commercial evaluation, approved lines route to the Release approved purchase requisitions form:

• Navigation: Procurement and sourcing > Purchase requisitions > Approved purchase requisition processing > Release approved purchase requisitions

Buyers utilize this workbench to achieve economy-of-scale savings through Demand consolidation:

1. Aggregating Lines: Multiple approved lines from different departments requesting the identical released item or vendor are grouped together.
2. Negotiating Volume Pricing: Consolidating five separate requests of 20 units into a single PO of 100 units triggers negotiated supplier price breaks and minimizes inbound freight handling.
3. Consolidation Opportunities: Buyers create a Consolidation opportunity record (Approved purchase requisition processing > Consolidation opportunities), setting a demand holding window (e.g., hold open requisitions for 7 days) to pool requirements across the enterprise before generating consolidated orders.

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4. Requests for Quotation (RFQs): Types, Solicitation, and Portal Collaboration

A Request for Quotation (RFQ) solicits competitive pricing, lead times, and delivery terms from multiple suppliers before an order is placed.

• Navigation: Procurement and sourcing > Requests for quotations > All requests for quotations

RFQ Document Types

When creating an RFQ header, the Request for quotation type determines the downstream commercial document generated upon bid award:

Solicitation Mechanisms: Direct Invitation vs. Public Collaboration

• Direct Invitation: The purchasing agent manually adds approved vendors to the RFQ header's Vendors FastTab. The system generates vendor-specific quotation sheets.
• Open Bidding / Public Solicitation: RFQs are published to the Vendor Collaboration portal. Prospective or registered vendors view public opportunities, register their intent to bid, and submit bids electronically.

RFQ Status Progression

1. Created: RFQ lines, delivery specifications, and questionnaire attachments are drafted.
2. Sent: Quotations are transmitted to vendors (printed, emailed, or published to Vendor Collaboration). Line status updates to Sent.
3. Received: Vendor responses are captured in the system. The RFQ is locked against modifications until evaluated.
4. Accepted / Rejected: Winning bid lines are accepted; non-winning bids are declined with mandatory reason codes.
5. Closed: Target purchase documents have been spawned, closing the sourcing event.

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5. Vendor Bidding, Multi-Criteria Scoring, and Quote Awarding

Capturing Vendor Bid Responses

Vendor responses are ingested through two pathways:

1. Vendor Collaboration Portal: External suppliers log in securely, navigate to Bid on RFQs, enter unit prices, lead times, promised delivery dates, line discounts, and miscellaneous charges. Suppliers can propose alternate items or split delivery quantities.
2. Manual Bid Entry (Enter reply): If vendors submit quotations via physical mail or email, the buyer opens the RFQ, clicks Enter reply on the Action Pane, and transcribes the commercial terms directly into D365 SCM.

Multi-Criteria Scoring Framework

To prevent purchasing decisions based solely on unit cost, D365 SCM provides an objective, multi-criteria scoring engine:

• Scoring Criteria: Configure evaluation dimensions under Procurement and sourcing > Setup > Request for quotation > Scoring criteria (e.g., Unit Price, Lead Time, Technical Specification Compliance, Quality Rating, Warranty Duration).
• Scoring Methods: Group criteria into a Scoring method (Setup > Request for quotation > Scoring methods) and assign percentage weightings (e.g., Price = 50%, Delivery Lead Time = 30%, Quality Rating = 20%).
• During bid evaluation, evaluators assign numerical scores (e.g., 1 to 5) to each criterion for each vendor response line.

Bid Comparison and Award Execution

1. On the RFQ Action Pane, click Compare replies.
2. The system displays a side-by-side comparison matrix showing prices, quantities, delivery dates, line charges, and weighted composite scores.
3. Awarding: The buyer selects the winning vendor line and clicks Accept. The system prompts for an acceptance reason code.
4. Declining: Non-winning vendor lines are updated by clicking Reject, triggering automated rejection notifications containing formal reason codes (Setup > Request for quotation > Reason codes).
5. Document Generation: Accepting the line instantly updates the RFQ line to Accepted and executes document conversion based on the RFQ type (Purchase order, Purchase agreement, or Purchase requisition update).

[!TIP] Prospective Vendor Promotion: If an open RFQ is awarded to an unapproved prospective vendor who bid via Vendor Collaboration, D365 SCM halts purchase order generation until the vendor completes the Prospective vendor registration workflow and is promoted to an active approved vendor account.