Procurement Categories and related setup

1. Procurement categories are setup at Product Management > Setup > Categories > Category Hierarchy.
2. Initially, only category structure is created (as mentioned in step 1) and then the type is assigned to the structure at Product Management > Setup > Categories > Category hierarchy types. This is really weird, as anyone would normally think that the category hierarchy type would be mentioned somewhere in the category hierarchy record, as a drop down. But no, there are fixed system-defined categories, which are mentioned in the path above.
3. The user has to associate the category hierarchy to the category hierarchy type. There are fixed category hierarchy types. They are:
• Procurement category hierarchy
• Sales category hierarchy
• Retail product hierarchy
• Commodity code hierarchy
• Derived financial hierarchy
• Supplemental retail hierarchy
• Retail channel navigation hierarchy
• Management reporter
4. Only one type of category hierarchy is allowed for one category hierarchy type.
5. We are interested in Procurement category hierarchy here in this article. The moment, the category hierarchy is linked to the category hierarchy type, additional fields related to the category hierarchy type, will be displayed on the category hierarchy records. User needs to fill them.
6. Ledger posting setup for procurement categories:
• If the procurement categories are used in project module, for project PO, then the procurement categories needs to be linked with the project categories. Project Category Ledger posting setup will then link this to the appropriate ledger code / account.
• If the procurement categories are used in a stand-alone PO, then the procurement category postings to the appropriate code is to be setup at Stock and warehouse management > Setup > Posting > Posting. In the 'Item code' drop down, apart from the standard 'Table', 'Group', 'All', there is one more option to select 'Category'. This category drop down will then show all the categories created in step 1.
7. Point 6 is all about the postings in the P&L .i.e. Cost postings. The balance sheet posting for a PO will always be Trade / Account payable.
8. This was all about the setup of the procurement category and its posting setup from a standalone PO and Project PO perspective. There is one more point to be discussed and that is invoice matching.
9. Invoice matching setup for procurement categories:
• Invoice matching setup applicable for 'Items' is setup at: Purchase Ledger > Setup > Purchase Ledger parameters > Invoice validation > Price and quantity matching.
• Invoice matching setup applicable for 'Procurement categories' is setup at: Procurement and sourcing > Setup > Policies > Purchasing policies > Policy rule > Category policy rule > Category matching policy.
10. Procurement categories can be accessed from following navigation : Procurement and sourcing > Setup > Categories > Procurement categories.  From this navigation user will not be able to create the new categories in the category hierarchy structure, but will be able to edit certain fields. However there is a button called ' Edit category hierarchy' which when clicked will open open up the category hierarchy structure form (which is same as navigation from step 1).
11. There is one more setup which is different for items and for procurement categories, i.e. over and under delivery.
12. Over / Under deliver settings for:
• Items is at Procurement and sourcing > Setup > Procurement and sourcing parameters > Updates. (Checkbox)
• Procurement categories is at Procurement and sourcing > Setup > Categories > Procurement categories > Under / over delivery (percentage field to be filled in manually)

This was all about main settings related to procurement categories and items and their relationship with the general ledger. Will update this post more, if i find anything worth noting down.

Thanks

Sarang