Vendor collaboration with external vendors

This topic describes how purchasing agents can collaborate with external vendors to exchange information about purchase orders and consignment inventory.

The Vendor collaboration module is targeted at vendors who don’t have electronic data interchange (EDI) integration with Microsoft Dynamics 365 for Finance and Operations. It allows vendors to work with purchase order, invoice, and consignment inventory information. This topic describes how you can collaborate with external vendors who are using the vendor collaboration interface to work with POs and consignment inventory. It also describes how to enable a specific vendor to use vendor collaboration, and how to define the information that all vendors will see when they respond to a PO. For more information about what external vendors can do in the vendor collaboration interface, see Vendor collaboration with customers.

The information in this topic about vendor collaboration applies only to the current version of Dynamics 365 for Finance and Operations. In the February 2016 and May 2016 versions of Microsoft Dynamics AX, you collaborate with vendors by using the Vendor portal module. For information about the Vendor portal module, see Collaborate with vendors by using the Vendor portal.

For more information about how vendors can use vendor collaboration in invoicing processes, see Vendor collaboration invoicing workspace. For information about how to provision new vendor collaboration users, see Manage vendor collaboration users.

For more information about how vendors can use vendor collaboration in invoicing processes, see Vendor collaboration invoicing workspace.

For information about how to provision new vendor collaboration users, see Manage vendor collaboration users.

Define the information that is shown to vendors when they respond to POs

When vendors respond to a PO that you send them, they see a message box where they must confirm that they want to accept the PO, reject it, or accept it with changes. Because the information that must be shown to the vendor at that point might be specific to your business, you can specify the text that appears in each of the three confirmation messages. For example, the text can inform the vendor about the next steps in the process, or about terms and conditions.

To define the text that's shown in the PO response:

  1. Open the Information for vendors responding to POs page.
  2. Select one of the response types.
  3. Click Edit.
  4. Enter the information that you want vendors to see in the Information message box.

If you must add messages in more than one language, create separate messages and specify the appropriate language codes for each. The message that shown to the vendor will be in the language that the vendor uses.

Set the vendor collaboration options for a specific vendor

The general settings for vendor collaboration in Finance and Operations are configured by an administrator. For example, an administrator will determine which security roles are available for all the vendors that you collaborate with. There are also settings that can differ for each vendor account, and you should set these:

  • Enable vendor collaboration.
  • Decide whether you want vendor to see price information.

Enable vendor collaboration

Before user accounts can be created for an external vendor, you must configure the vendor account to allow them to use vendor collaboration. To do this, set the Collaboration activation field to active on the General tab on the Vendors page. There are two options that you can choose:

  • Active (PO is auto-confirmed) - Purchase orders are automatically confirmed when the vendor accepts them without changes.
  • Active (PO is not auto-confirmed) - Purchase orders need to be manually confirmed by your organization, after the vendor has accepted them.

Decide whether you want the vendor to see price information

If you want to share price information such as unit price, discounts, and charges via the collaboration interface, you need to set the Purchase order prices/amount option to Yes on the vendor account. This option is available on the Purchase order defaults tab.

Work with POs when using vendor collaboration

Sending a PO to the vendor

Purchase orders are prepared in Finance and Operations. When the PO has a status of Approved, you send it to the vendor using the Send for confirmation action on the Purchase order page. The PO status changes to In External Review. After the PO has been sent, the vendor can see it on the Purchase orders for review page in the vendor collaboration interface. The vendor can then accept the order, reject it, or suggest changes to it. The vendor can also add comments to communicate information such as changes to the PO. If you want to draw the vendor’s attention to a new PO, you can also use the print management system to send the PO by email.

Confirmation and acceptance of the PO by the vendor

When a vendor has accepted a purchase order, the PO may be automatically confirmed, or it may need to be manually confirmed. This depends on whether the Vendor activation field is set to Active (PO is auto-confirmed) or to Active (PO is not auto-confirmed) for the vendor.

The following table shows the typical exchange of information, depending on how the vendor responds when you send a PO for confirmation.

Vendor response Result
The vendor accepts the order. Finance and Operations is configured to automatically confirm POs when the vendor accepts. The status of the order is updated to Confirmed. If something prevents the order from being updated, the vendor response is still recorded as Accepted, but the status of the PO remains In External Review. The PO that was sent to the vendor and that is In External Review status is updated with confirmed delivery dates on the lines. The update initiates a new version that will automatically be updated to Confirmed status. When the PO is confirmed, it will appear in the vendor’s collaboration interface.
The vendor accepts the order. Finance and Operations is not configured to automatically confirm POs when the vendor accepts. The vendor response is recorded as Accepted, but the status of the PO remains In External Review. The PO that was sent to the vendor and that is in In External Review status is updated with confirmed delivery dates on the lines. The update initiates a new version that will be set to In External Review. You will then be able to manually confirm the PO.
The vendor rejects the order. The vendor response is recorded as Rejected, and the status of the PO remains In External Review. The rejection is received together with the vendor's note.
The vendor accepts the order with changes. Changes are suggested at the line level. It’s possible to accept or reject individual lines. Other possible changes include:
  • Changing dates or quantities.
  • Splitting lines for different delivery dates or quantities.
  • Substituting an item.
Price information and charges cannot be changed by the vendor. Suggestions for changes to these can be made using notes.
The vendor response is recorded as Accepted with changes, and the status of the PO remains In External Review. The statuses show which types of changes the vendor has suggested. For information about automatic consumption of the changes, see the section below on how to update the PO when a vendor suggests changes.

You can use the Purchase order preparation workspace to monitor which POs the vendor has responded to. This workspace contains two lists that contain purchase orders with a status of In External Review:

  • In external review requires action.
  • In external review awaiting vendor response.

Changing a PO

To change a PO that has already been responded to, you must send a new version of the PO to the vendor. The new PO will have a version suffix to indicate that it’s a modified version of a PO that was previously communicated. The Purchase order vendor confirmation history page lets you and your vendors track the history of each order. The previously confirmed version of a PO remains in the list of confirmed POs until the new PO has been confirmed.

Cancelling a PO

When you cancel a PO, the status is changed to Approved. You must send the PO back to the vendor, so that the vendor can confirm or reject the cancellation. After the cancellation is confirmed, the PO appears in the vendor’s list of confirmed POs as Cancelled.

Adding attachments to a PO

You can add attachments such as files, images, and notes to the PO by using the document management system. Attachments of the External type will be visible to the vendor when you send the PO.

Update the PO when a vendor suggests changes

When a vendor has responded to the PO and suggested changes, the next step is to process the response. In the Purchase order preparation workspace, in In external review requires action list, you can identify a PO that a vendor responded to as accepted with changes. In the In external review requires action list, you can also navigate to the vendor’s response. On a response, a vendor can change the following information on the header.

  • Vendor document reference
  • Mode of delivery
  • Delivery terms
  • Confirmed delivery date

The vendor can also add a note or attachment

On the lines, the vendor can change the quantity and the delivery dates, add notes and attachments, reject a line, substitute a line with an other product that is keyed in as text, and split a line into multiple deliveries. Depending on which changes that are suggested by the vendor, the line status will have different line statuses:

  • Accepted with changes
  • Rejected
  • Substituted In this case an extra line will be added that has the status Substitute.
  • Confirmed Split into schedule In this case extra lines will be added that have the status Schedule lines.

If a line has no changes, the line status is Accepted.

On the response, you can see the previously mentioned line statuses that indicate the types of changes that the vendor made. Additionally, all changed fields appear in bold to help you identify the changes.

You can update a PO by clicking the Process PO update action on the response or on one line at a time. An indicator, Is PO update processed?, on the header and the lines lets you see whether the system has processed the header or lines to update the PO with any potential changes that originate from the response. You can run the Process PO update process only one time per header or line.

Not all suggested changes can be updated on a PO. Only updates on the header, and updates of dates and quantities on lines can automatically be updated on the PO. For other changes, you must manually update the PO. In this case, the Is PO update processed? indicator shows Manual update. An example of a change that has to be handled manually would be when a vendor suggests to split a line into a schedule.

A line that has a status of Accepted will have a confirmed delivery date that will be updated on the PO when you execute the Process PO update. Notes and attachments won’t automatically be transferred to the current PO. Note that when you update the current PO via the Process PO update action, trade agreements will not be reassessed on the PO lines.

PO statuses and versions

This section describes the various statuses that a PO can have up to the time when it’s confirmed. It also describes at what point new versions of the PO are made available to the vendor. The behavior varies, depending on whether you use change management for POs.

Versions and statuses if you don't use change management

The following table shows an example of the changes in status and version that a PO might go through.

Action Status and version
The initial version of the PO is created in Finance and Operations. The status is Approved.
The PO is sent to the vendor. A version is registered in the vendor collaboration interface, and the status is changed to In External Review.
The vendor sends an Accepted with changes response. The status is still In External review.
You make some changes that are requested by the vendor. The state is changed to Approved.
You send the new version of the PO to the vendor. A new version is registered in the vendor collaboration interface, and the status is changed to In External Review.
The vendor accepts the new version of the PO. The status is still In External Review unless the vendor account is configured to automatically set the PO to a Confirmed state when they accept it.

Vendors don’t have to confirm the PO by using the vendor collaboration interface. They can also send an email message or communicate their acceptance of a PO via other channels. You can then confirm the order manually in Finance and Operations. In this case, you will receive a warning that the order is being confirmed even though there is no response from the vendor. The PO then appears in the confirmation history as an open confirmed order that doesn’t have any responses. The vendor no longer has the option to confirm or reject the PO.

Note

The version of the PO that is available to other processes in Dynamics 365 for Finance and Operations is always the latest version, even if that version hasn’t yet been registered in the vendor collaboration interface.

Versions and statuses if you use change management

If change management is enabled for POs, the PO goes through an approval workflow to reach the Approved status. This process isn’t visible to the vendor.

The following table shows an example of the changes in status and version that a PO might go through when change management is turned on. The version is registered when the PO is approved, not when the PO is sent to the vendor or confirmed.

Action Status and version
The initial version of the PO is created in Finance and Operations. The status is Draft.
The PO is submitted to the approval process. (The approval process is an internal process that the vendor isn’t involved in.) The status is changed from Draft to In Review to Approval if the PO isn’t rejected during the approval process. The approved PO is registered as a version.
The PO is sent to the vendor The version is registered in the vendor collaboration interface, and the status is changed to In External Review.
You make some changes that are requested by the vendor, either manually or by using the action on the response to update the PO. The status is changed back to Draft.
The PO is submitted to the approval process again. The status is changed from Draft to In Review to Approval if the PO isn’t rejected during the approval process. Alternatively, the system can be configured so that specific field changes don’t require re-approval. In this case, the status is first changed to Draft and is then automatically updated to Approved. The approved PO is registered as a new version.
You send the new version of the PO to the vendor. The new version is registered in the vendor collaboration interface, and the status is changed to In External Review.
The vendor approves the new version of the PO. The status is changed to Confirmed, either automatically, or when you receive the response from the vendor and then confirm the PO.

Share information about consignment inventory

If you’re using consignment inventory, vendors can use the vendor collaboration interface to view information on the following pages:

  • Purchase orders consuming consignment inventory - Purchase orders for consignment inventory are generated when the ownership of the inventory is changed from the vendor to your company. A product receipt is posted at the same time. These consignment purchase orders are only displayed on the Purchase orders consuming consignment inventory page. They are not included in the All confirmed purchase orders page in the Vendor collaboration module.
  • Products received from consignment inventory - This page lists all the transactions where the ownership of products has been transferred from the vendor to your company. Vendors can use this information to invoice the customer.
  • On-hand consignment inventory - This page shows the vendor owned on-hand consignment inventory that has been received at your warehouse.