By definition Contracts are long term agreements the business enters with the vendor for providing a certain quantity of a product for period of time. In SAP, this can be represented by a Purchasing Contract. Contracts can be created for the value or quantity. These contract can be set up to reduce or to be utilized by purchase orders that are being placed with reference to the contracts. Typically the businesses scenario for using Contracts would be when they want to reserve capacity at the vendor or for booking greige in the manufacturing context.
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Author: Tharaka Perera