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Contract and Scheduling Agreement

What are the differences between Contract and Scheduling Agreement?

How do we decide which is to be opted in a particular situation?

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    author's profile photo Former Member
    Former Member
    Posted on Dec 03, 2007 at 03:35 PM

    Hi Kumar,

    The fundamental difference between contract & scheduling agreement is that, Contracts can be thought of a blanket agreement with a vendor without fixing the date of supply, while the scheduling agreement can be thought of as purchasing agreement with dates agreed upon.

    Contract are of 2 types - Quantity & Value, eg: With a particular vendor, you might have a contract to buy 100 pieces of a material over one year or you might decide to buy materials worth Rs. 10,000.

    Scheduling Agreement - Here you actually specify the quantity to supplied on a timeline, eg: you might define a timeline say

    1st Month - 20 pieces

    4th Month - 30 pieces & so on.

    The main advantage of a Scheduling Agreement is that you can send a forecast to your vendor of your future requirements. This type of purchasing instrument is best suited where you buy on a regular basis from a particular vendor.

    The contract is best suited, where you do not know the exact dates as to when you would require the material, but have a rough estimate of requirement in terms of value or quantity

    Hope i was able to give you some insights to your question.



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  • author's profile photo Former Member
    Former Member
    Posted on Dec 03, 2007 at 03:46 PM

    Both are long term agreements. The main difference is that POs have to be created manually against a contract whereas delivery schedules can be created automatically for SA (via MRP Run).

    The below will illustrate when to use PO, contract and SA.

    Quantity to be purchased 100000 kg.

    1) If exact schedule is known - like 8000 kg for 11 months and 12000 kg for 12th month, then use PO

    2) If exact schedule is not known then go for contract or SA.

    2-a) If delivery schedule will be created via MRP, then go for SA. Typically would be for materials used in production where the requirement flows from a FG which is based on sales forecast, etc.

    2-b) If schedule will be done by user manually, as user to create PO (He will not have option to display or change prices) against contract. Typically used for MRO items which are required by multiple departments in the plant and each will procure as and when desired.

    Hope this is helpful...


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