Building a Smarter Buying Experience: How One Company Transformed Procurement with D365 F&O Catalogs

“We weren’t overspending because of fraud. We were overspending because we had no guardrails.”

That candid confession came from the CFO of a growing firm during our Dynamics 365 Finance & Operations implementation kickoff. Their team was manually typing item names into purchase requisitions. Multiple users were buying similar office supplies and services, but from different vendors, at different prices, and with no approval consistency.

The solution wasn’t more control—it was smarter enablement. That’s when we introduced the idea of a Procurement Catalog in D365 F&O: a system-embedded, policy-driven buying experience that guides users to the right products, from the right vendors, at the right prices.

This blog outlines how we turned that idea into reality—step by step—and how your organization can do the same using Microsoft’s best practices and the Business Process Catalog (BPC) framework.

🎯 Why procurement catalogs matter - 

In a modern Source to Pay (S2P) journey, procurement catalogs serve as the interface between your strategy and execution. They:

 - Reduce maverick and off-contract spend
 - Simplify user experience
 - Enforce category and vendor policies
 - Speed up approval and purchase cycles
 - Support audit compliance and spend analytics

And in D365 F&O, they integrate directly into requisition workflows, preferred vendor settings, and procurement policies.

🛠 Step-by-Step: How We Built the Procurement Catalog in D365 F&O

Let's walk through how we implemented the catalog - from foundational data to user enablement.

✅ Step 1: Build Your Category Hierarchy

📍 Navigation:

Product Information Management > Setup > Categories and attributes > Category Hierarchies.  

Click New to create a new category hierarchy - 

Enter name, description, and click 'Create'.

Add the parent node and the subsequent child nodes,

Assigned accounting rules, dimensions, and workflows to each node
🎯 Purpose: This hierarchy defines how your entire procurement structure is governed in the system.

⚙️ Bringing It to Life in Dynamics 365
Microsoft Dynamics 365 offers embedded features that make this process seamless:

🛒 Procurement & Sourcing: Catalogs, requisitions, RFQs, and contracts
💬 Vendor Collaboration: Secure supplier communication and document exchange
🧾 Accounts Payable Automation: OCR invoice ingestion, 3-way matching, and workflows
🏦 Cash and Bank Management: Payment proposal automation and reconciliation
📊 Power BI Spend Analytics: Visualize top vendors, categories, and cost variances
🔁 Power Automate: Trigger alerts, reminders, and exception handling
This digital backbone ensures consistency, traceability, and real-time decision-making.

🧠 Real-World Example: Procurement Catalog for Heavy Equipment Company

Here's how a heavy equipment company structures its catalog using a well-defined procurement category hierarchy in D365 F&O.

🔗 How These Categories Connect the Procurement Catalog

Each of these catalog items:

- Belongs to a defined procurement category in the hierarchy 

- Has financial dimension defaults inherited from the category

- Is linked to approved vendors who supply these goods or services

- Is governed by procurement policies (e.g. use of purchase agreements, spend limits, or category-specific workflows).

For example:

- “Hydraulic Excavator” purchases are routed to CapEx approvals and must use capital purchase agreements
- “Diesel Engine Oil” has a preferred vendor, and requests exceeding 100 liters require secondary approval
- “Preventive Maintenance Services” are outsourced and categorized to ensure correct cost allocation to equipment O&M budgets

📈 Business Impact After Go-Live

Within the first three months after implementation:

Catalog compliance jumped from just over one-third of purchases to nearly nine out of every ten
Requisition cycle time was reduced by more than half, significantly accelerating purchasing decisions
Off-contract spending dropped by more than one hundred and twenty thousand dollars, directly contributing to bottom-line savings
End users described the new catalog experience as “Amazon-like simplicity—with approvals built in”
The procurement team didn’t just gain operational control—they gained credibility, trust, and visibility across the organization.

🧠 Final Takeaway: Turn Process into Enablement
A procurement catalog isn’t just a tool. It’s a way to make your strategy usable.

With D365 F&O and Microsoft’s Business Process Catalog model guiding the way, you can:

Codify category strategies
Enforce vendor policies
Empower users to buy with confidence
And generate real-time data for sourcing improvements

💬 Want to Start?
📩 Reach out if you'd like:

A starter catalog template with sample items
A Visio flowchart for catalog-driven procurement
A checklist for Procurement Policy configuration in D365