The Policy That Pays Off: Unlocking Control with D365 Purchasing Policies

A global equipment manufacturing and service company, serving industries such as construction, mining, and energy, has long operated with multiple business units encompassing manufacturing, equipment rental, and field services. Within its Corporate Services division (including IT, HR, and Facilities), a significant volume of indirect procurement occurs daily.

Historically, purchasing in these departments was decentralized and inconsistently managed. Departmental buyers frequently created free-text requisitions, manually describing routine items like laptops, printer paper, safety gloves, and maintenance services. With no enforced vendor list or catalog, departments bought from whichever suppliers were most familiar to them, even if those vendors weren’t under contract.

This led to:

 - The same item being purchased at different prices across locations
 - Low usage of approved supplier agreements
 - High rates of off-contract or maverick spend
 - Difficulty tracking category-level purchasing trends
 - Extended approval cycles due to manual validation
 - Audit concerns due to lack of policy enforcement

To address these issues, the Procurement Director launched a transformation initiative using Dynamics 365 Finance and Operations (D365 F&O). The first milestone was to create and enforce a purchasing policy that enabled catalog-based buying and blocked free-form requests, without burdening users.

🎯 Strategic Objectives - 

The goal was to enforce catalog-only requisitions for key indirect categories such as Office Supplies, IT Accessories, and PPE within the company's U.S. legal entity (USMF). Rather than restricting purchasing power, the policy would guide users to compliant, pre-approved choices and drive better outcomes through automation.

Key objectives included:

 - Reducing off-contract purchases
 - Standardizing item descriptions and pricing
 - Streamlining the requisition approval process
 - Ensuring only approved vendors were used
 - Providing spend transparency for reporting and audits

🔍 Policy Coverage and Controls -

To achieve this, the team configured a layered purchasing policy in D365 F&O using the following policy rules:

🔹Catalog Policy Rule
     Buyers were restricted to selecting only from catalog items for specified procurement categories. Free-text entries were disabled. This ensured:

     - Consistent descriptions and pricing
     - Automatic vendor and category assignment
     - Better alignment with budget controls
🔹Category Access Policy Rule
     User roles such as IT Analysts, Facilities Coordinators, and HR Assistants were mapped to only the procurement categories relevant to their function. This prevented errors and improved accountability.

🔹Requisition Purpose Rule
     The system defaulted requisition purposes (e.g., Operational, CapEx, Maintenance) based on the selected category. This streamlined GL mapping and spend reporting.

🛠 Step-by-Step: How to set up policies for procurement category hierarchies

Purchasing policies in Dynamics 365 Finance and Operations are often treated as a bit of a “black box.” In many projects, we tend to overlook this functionality during the process mapping phase, either because it's not well understood or it isn’t given the attention it deserves. I believe one of the key reasons for this is a general lack of awareness about the value and control these policies can offer. With that in mind, I wanted to take the opportunity to shed light on this topic, so that we, as consultants and solution designers, can begin to use purchasing policies more effectively when defining business processes for our customers.

At its core, a purchasing policy is a way to enforce specific rules and restrictions within the procurement process. As the name suggests, it serves as a policy enforcement mechanism that governs sub-processes such as purchase requisitions, requests for quotations (RFQs), and purchase orders. If there's a need to apply a control—whether it's around category access, vendor usage, catalog enforcement, or spend thresholds—purchasing policies can be configured to handle it directly within the system. D365 offers several types of policy rules that can be tailored to meet unique business requirements.

In this blog, I’ll start with one such rule: the Procurement Category Access Policy. In future posts, I plan to explore additional policy types in more depth.

To illustrate this with a scenario, let’s take an example of a company operating under the USMF legal entity. The organization has a well-defined procurement category hierarchy, but it wants to ensure that users are only allowed to create purchase requisitions for the “Office Machines” category and its subcategories. In this case, users should not be able to select any other category or request products that fall outside of this predefined group. This type of control can be easily achieved through the category access policy rule within the purchasing policy framework in D365, ensuring system-level compliance with business rules.

In this blog, we will go through the "Procurement Category Hierarchy" access policy,

Let's use the USMF legal entity for this demonstration purposes. The USMF company has the procurement category hierarchy defined, but the organization wants users to create purchase requisitions only for the Equipment category or its subcategory. The user should not be able to select any other category or even any other product which is not part of this category or its subcategory.

✅ Step-by-step set up policies from D365 FO - 

Step 1: Create or find the procurement policy

Navigate to Procurement and sourcing > Setup > Policies > Procurement policies

Step 2: Create category access rule -

Select policy rule type as "Category access policy rule" and create a policy.

 - Select the legal entity for which the rule should be created

 - The create policy will be enabled only when there is no other effective rule exists 

Step 3: Select the category or subcategory for which you want to give access to this company

 - Select the category which you want to access for this legal entity, including sub-category will allow subcategory as well.

Now, let us validate whether the policy is effective or not.

⚙️ Validate policy setups using purchase requisition
Navigate to procurement and sourcing > Purchase requisitions > All purchase requisitions

Create a purchase requisition and try to add lines,

🧠 Implement Rollout

The policy was launched in a phased manner:

 - Category managers finalized the catalog structure and vendor associations
 - The Procurement team configured the policy rules and tested end-to-end scenarios
 - Business users were trained through short walkthroughs and quick-reference guides
 - Dashboards were created to track catalog compliance and cycle time

📈 Business Impact After Go-Live

Within the first three months:

 - Catalog-based requisitions accounted for nearly 90% of all indirect purchases
 - Requisition approval times were cut by more than half, improving responsiveness
 - Off-contract purchases dropped significantly, resulting in six-figure cost savings
 - Users praised the new system for offering “Amazon-like simplicity—with built-in accountability”
 - The Procurement team gained not just process control, but also strategic visibility and organizational trust

💬 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