SAP SD -Handout

S

ALES

& D

ISTRIBUTION

O

VERVIEW

Introduction to SAP

• SAP Supports all Kinds of Industries and all Functions of the Industry

• SAP is an Integrated System

• This means that all SAP modules are designed to share information and

automatically create transactions based on various business process.

R/3 Business Application Modules

• FI - Financial Accounting

• IM - Investment Management

• CO - Controlling

• SD - Sales

• MM - Materials Management

• PP - Production Planning

• QM - Quality Management

• PM - Plant Maintenance

• PS - Project System

• HR - Human Resources

Business Process Integration

Ru

les

FI

MM

SD

FI

_MM

SD

Company X

Order to Cash

Purchase to Pay

Internal Functions

• Buy goods and services

• Receive those goods and services

• Pay for what they have received

• Receive customer orders

• Deliver to customer

• Invoice the customer

• Receive payment

• Manufacturing

• Inventory Control

• Accounting functions

• Human Resources

SAP Sales Order Process

(Order-to-Cash)

Sales Order

Entry

Post Goods

Issue

Invoice

Customer

Delivery Note &

Pick Materials

Receipt of

Customer Payment

Pack

Materials

Check

Availability

Pre-Sales

Activities

Sales Quotation

Entry

Sales Order

Delivery

Billing

Accounts

_Receivable

The Order to Cash process is made up of four basic

process blocks:

Captures the

customer

demand

Transition of

ownership

Charging the

customer for

the goods or

services that

they have

received

Receiving

payment for

the goods or

services that

they have

received

Sales Order

Delivery

Billing

Accounts

_Receivable

Captures the

customer

demand



What does the customer want?



Where does the customer want the goods/services to go?



Input to the delivery process



Input to the demand fulfilment process (do we buy or make it?)



Pricing



Credit Checking



Availability Checking



Output : Order Acknowledgement

Sales Order

Delivery

Billing

Accounts

_Receivable

Transition of

ownership



Many goods orders may be put on a single delivery



A single order could be split into many deliveries



When a delivery is completed, ownership is transferred to the customer



Picking



Packing



Foreign Trade



Shipping / Routes / Transportation



Output : Delivery Docket / Manifest / Bill of Lading



G/L Posting

Sales Order

Delivery

Billing

Accounts

_Receivable

Charging the customer

for the goods or

services that they have

received



Typically the invoice is produced as the delivery has been completed



Also periodic invoicing



Pricing



Credit Update



Output : Billing Document / Invoice



G/L Posting



Transfer to CO-PA (Sales Reporting)

Sales Order

Delivery

Billing

Accounts

_Receivable

Receiving

payment for

the goods or

services that

they have

received



Customer pays in accordance with terms of payment



Money can be received via cash, cheque, EFT



Credit Update



G/L Posting

Sales Order

Delivery

Billing

Accounts

_Receivable

The OTC process flow triggers G/L postings:



When the delivery is Post Goods Issued (ie: transfer of ownership)



When the billing document is produced



When customer payment is received

DR COGS

CR Inventory

No

posting!

DR A/R Cust.

CR Revenue

DR Cash at

Bank

CR A/R Cust.



COGS



Inventory



A/R Cust.



Revenue



Cash at Bank



A/R Cust.

IMG

• It is where all the customizing takes place.

PS

PP

CO

FI

….

HR

MM

SD

FI

MM

PP

CO

FI

CO

PP

MM

_FI

CO

SAP Reference IMG

Enterprise IMG

Sales and Distribution Organisational Structure

• An organization Structure provides the foundations for an organization to complete its business. It provides the structure for:

 Performing business functions – e.g. create sales orders  Reporting – e.g. stock listing by warehouse

 Legal requirements  Financial requirements  Managing controlling  Physical facilities

 Supply chain of products from warehouse to customer  Integration with other modules in SAP

Guiding principles for design…

 Standardization – create uniform structures and standards across business units  Simplicity – represent the business with a structure which is simple. Adding

unnecessary complexity will drive maintenance issues, user error, etc.

 Flexibility – the structure should have the ability to handle future growth such as new

products, new warehouses or even acquisition of new businesses

Company Code Sales Organization Distribution Channel Division

Sales Area – Sales Office – Sales Group Plant – Storage Location

• A

Company Code

represents a legal entity of the organization (as

defined per the legal requirements of that country)

• It is the organization unit which needs relevant financial statements

such as balance sheets and profit and loss statements as a result of

business transactions

• The Sales organization is responsible for the sale of certain products or

services

• It is responsible for product liability and rights of recourse

• Sales organization is assigned to the company code

• One company can have more than one sales organization but one sales

organization can only be assigned to one company

Company ABC

Sales Org 1000

• The distribution channel represents the channel through which salable

materials or services reach

• Within a sales organization a customer can be supplied through several

distribution channels.

• The distribution channel is assigned to the sales organization

• One distribution channel can be assigned to more than one sales org and

sales organizations generally have multiple divisions

Company ABC Sales Org 1000 (e.g. Singapore) Sales Org 2000 (e.g. Australia) Distribution Channel 01

• A

Division

distinguishes between business segments and is used to

track sales, profitability, and statistical analysis.

• For example, a division may be used to represent product group or any

other grouping in the sales organization structure

• A material is always assigned to one division only

Company ABC Sales Org 1000 (e.g. Singapore) Sales Org 2000 (e.g. Australia) Division 01

• Sales Area is the combination of

• Sales organization

• Distribution Channel

• Division

• Sales Area is assigned to Credit Control Area to activate credit management

system for the area

• SAP SD uses sales area as the center in this module

• Before the Sales Area is set up, the following assignments needs to be made in

customisation:

 Assign Distribution Channel to Sales organization

 Assign Division to Sales organization

• Sales Office:

• A organizational unit in a geographical area of a sales organization.

• Sales Group:

• A Group of people who is responsible for Sales.

Note: The Sales Office is assigned to Sales Area

The Sales Group is assigned to Sales Office

• A plant can be a production facility, a material stock location, or even a repair

facility

• From the point of view of SAP SD, a plant can be defined as a material stock

location from where you can source the delivery of goods to your customers

• Plant is assigned to a company code and a company code can have more than

• A storage location is the place where stock is physically kept within a

plant

• A storage location has the following attributes:

 There may be one or more storage locations within a plant

 A storage location has a description

 It is possible to store material data specific to a storage location

 Stocks are managed only on a quantity basis and not on a value basis

at storage location level

 Physical inventories are carried out at storage location level

• Storage locations are assigned to the plant

• The shipping point is the top level in the organization for shipping

• Shipping Point represents a fixed/physical location that is responsible for

processing and monitoring deliveries as well as goods issue

• A shipping point can be allocated to several plants

• A delivery is always initiated from exactly one shipping point. Thus, all items of a

delivery belong to one shipping point.

• A loading point is a subdivision of a shipping point.

• A place in a shipping point where goods are loaded.

• The definition of loading points is optional

• The exact physical location where the loading of a delivery item takes place (for

example, the number of a specific loading bay).

Company

Shipping points Truck Rail depot Ship depot

Loading points

Ramp A Ramp B

Plant

SD: Master Data

Customer Master Data

Material Master Data

Cust/Mat Info Record

Output Master Data

Condition Master Data

Customer Master

Company Code 102

Company Code 101

Company Code 100

Client 410

Sales Org. 101

Sales Org. 100

General Information relevant for the entire organization:

Name Address

Communication

Company Code specific information:

Acc. Mgmt Payment

Bank

Sales Area specific information:

Sales Office Currency

Customer Master Data

• Customer Master

– Contains all of the information

necessary for processing orders,

deliveries, invoices and customer

payment

– Every customer MUST have a

master record

• Customer Master Data is

created by Sales Area

– Sales Organization

– Distribution Channel

– Division

Customer Master Data

• The customer master

information is divided

into 3 areas:

– General Data

– Company Code Data

– Sales Area Data

PY - Payer

CP - Contact Person

Customer

Master

SH - Ship-to Party SP - Sold-to Party

Mandatory Functions

………..

To distinguish these different roles of the Customer, Partner Functions are used in SAP to define the different roles. Partners can also be used for reporting, output determination, agreements and pricing.

Places the Order

Receives the goods

Receives the invoice

Settles the account & Pays the receivables

SP – Forwarding Agent

SD: Material Master

Plant 102

Plant 101

Plant 100

Client 410

Storage Location 20

Storage Location 10

General Information relevant for the entire organization:

Name Weight U/M

Sales specific information: Delivery Plant

Loading Grp

Storage Location specific information:

Material Master

• Material Master

– Contains all the information a

company needs to manage about

a material

– It is used by most components

within the SAP system

• Sales and Distribution • Materials Management • Production

• Plant Maintenance • Accounting/Controlling • Quality Management

– Material master data is stored in

functional segments called Views

Customer-Material Information Record

• Data on a material defined for a

specific customer is stored in a

Customer material info record

.

• Info Records contain:

– customer-specific material number – customer-specific material description – customer-specific data on deliveries

and delivery tolerances

• You can also maintain default text to

appear on sales orders for that

Condition Master (Pricing)

• Condition master data includes:

– Prices

– Surcharges

– Discounts

– Freights

– Taxes

• You can define the condition master to

be dependent on various data:

– Material specific

– Customer specific

• Conditions can be dependent on any

document field

SD Process: Inquiry

• An inquiry is a customer’s request to a company for information or quotation in

respect to their products or services without obligation to purchase

– How much will it cost

– Material/Service availability

– May contain specific quantities and dates

• The inquiry is maintained in the system and a quotation is created to address

questions for the potential customer.

SD Process: Quotation

• The quotation presents

the customer with a

legally binding offer to

deliver specific products

or a selection of a

certain amount of

products in a specified

timeframe at a

SD Process: Sales Order

• Sales order processing can originate from a variety of documents and

activities

– Customer contacts us for order: phone, internet, email

– Existing Contract

– Quotations

• The electronic document that is created should contain the following

basic information:

– Customer Information

– Material/service and quantity

– Pricing (conditions)

– Specific delivery dates and quantities

– Shipping information

SD Process: Sales Order

• The sales document is

made up of three primary

areas:

– Header

• Data relevant for the entire sales order: Ex: customer data, total cost of the order

– Line Item

• Information about the

specific product: Ex: material and quantity, cost of an

individual line

– Schedule Lines

• Uniquely belongs to a Line Item, contains delivery quantities and dates for partial deliveries

Structure of sales documents

Header

Line Item # 1

Line Item # 2

Schedule Line # 1

Schedule Line # 1

Schedule Line # 2

Controlling Sales Documents via …

• Sales Document type

• Item Category

Some of the standard order types..

 Standard Order (OR)

 Cash Sales (CS)

 Rush Order (RO)

 Credit memo (CR)

 Debit Memo (DR)

 Returns (RE)

Sales Order: Delivery Scheduling

• When an order is created the you must enter a

requested delivery date for the order or each line

item

• The system will then determine a delivery timeline,

this will be used when determining our material

availability, or ATP (Availability to Promise) date

• The system will determine this date using forward and

backward scheduling rules you have defined.

Delivery Processing..

 The Shipping Process is initiated with the creation of the

Delivery

document.

 The Delivery Document manages the Picking, Packing and

Goods Issue. It is also used in the creation of the Shipment

document.

Picking

Packing

Loading

Post Goods Issue

Delivery

Note

Each step in

the delivery

process

updates the

delivery note

status

Functions in Shipping Process

• Monitoring of deadlines for reference documents due for shipping

(customer orders, purchase orders)

• Creation and processing of outbound deliveries

• Monitoring of goods availability

• Monitoring of capacity situation in the warehouse

• Picking (with a link to WMS)

• Packing of the delivery

• Printing and distribution of shipping documents

• Processing of goods issue

Prerequisites for Creating Deliveries from Sales Orders

 Header level

1. There cannot be a delivery block at header level.

2. Sales Order must contain at least one item due for delivery



Item Level and Schedule line Level

3. The schedule line must be due for shipping on the specified selection

date.

4. The schedule line cannot be blocked for delivery.

5. The delivery quantity must be greater than one.

6. The items in the order must be fully processed.

7. The product status of the material must permit delivery.

8. Sufficient quantity of the material must be available.

Outbound delivery Structure

A delivery document consists of:

Overview

Header

Items

Overview

Item Data

Header Data

Origin of Data in Delivery

• Data from ship-to party master record

• Data from material master of

Delivery Type Controls..

The customisation is being made for a standard delivery process. Here sales order is a mandatory requirement in creating this delivery type

Delivery Item Category Determination

 The Item Category is copied into the delivery from the sales document

based on the copy control settings.

Standard Order OR --- Order Item Category TAN Outbound Delivery LF --- Delivery Item Category TAN Copy Control



For order-independent deliveries (e.g. ‘LO’), SAP cannot use the copy

control settings to determine the Item Category



In this case, the system proposes delivery item categories using below

determination rule

+

+

=

Creating Outbound Deliveries

• A delivery is processed through one shipping point.

Creating single

Delivery Document

manually

OR

LF

LO

Collective processing

of Delivery Document

Processing Back ground Processing

•

Sales order

Creating Deliveries..

Order

Combination

Partial

Delivery

Complete

Delivery

Collective Delivery Creation

Selection can be made based on various criteria or common data

e.g. Shipping Point, Delivery

creation date, all deliveries travelling on the same route

Complete and Partial Delivery

Outbound delivery 08401 Sales Order 02345

Outbound delivery 08402

Partial delivery

Sales order may be split into multiple deliveries for various reasons:

 The full sales order quantity is not available

 Different shipping points proposed in the Sales Order

 Items having different routes

It is also possible to split a single line item in the sales order into 2 different

deliveries

Transfer Order: Information Flow

Outbound delivery 08400 ---

Item Material Delivery Pick Qty. Qty.

10 M -02 40 pc 40 20 M -03 20 pc 20

Transfer order ---

Item Material Pick Qty.

10 M -02 40 pc 20 M -03 20 pc Pick Quantity Delivery Quantity Pick status is updated

After the goods have been picked, the transfer order updates the following items

in the delivery:

Complete and Partial Delivery

A setting on the Ship-to party Customer Master Data controls whether

customers will accept:

 a single delivery per order (complete delivery); or

 multiple deliveries for the order placed (partial deliveries)

Outbound delivery 08400 --- Item 10 560001 10 pc Item 20 560002 40 pc Sales Order 02345 --- Item 10 560001 10 pc Item 20 560002 40 pc Complete delivery

Picking Process

 Picking involves preparing the goods and ensuring that the correct quantity and

quality are ready for dispatch

 The picking process allows:

 Printing of pick lists and labels

 Monitoring the status of the picking of items

 Single and collective picking

 Warehouse Management (WM) is fully integrated with SD and can be used to

manage the picking process

 In using WM (lean or full), the picking process is initiated by creating the transfer

order. It is an internal warehouse process involving movement of goods from

source storage location to destination storage location

 The picking process is optional and can be made not relevant in the delivery item

category.

Picking Location Determination

Storage Condition

Shipping Point

Delivering Plant

Picking Location

=

+

+

 Picking is carried out from a particular storage location

 A storage location will only be determined when an Item is relevant for picking

 The storage location can be manually changed by the user if required

 When the delivery is goods issued, the picking quantity is reduced from this

storage location/plant

Picking Status

With the delivery, items can have the following picking status:

 not started

 partially picked

 fully picked

 not relevant for picking

If using WM, then a separate status will be included

The picking status is

shown on the picking tab

in the Delivery:



_{Header  Overall}

Picking Status



_{Line Item }

Individual Line Item

Status

Picking Quantity

A. Delivery Quantity – this was

the quantity ordered by the

customer (copied from the

sales order)

B. Picking Quantity – this is the

actual quantity picked by

the warehouse

PGI can’t be done unless Delivery quantity = Picking Quantity

Picking Process Summary

Outbound delivery

--- Creating transfer order _{for the delivery}

... ... ... . . . . . . . . . . . . . . ... ... ... . . . . . . . ... ... ... . . . . . . . . . . . . . . Print Pick Slip

Pick Slip

Confirm transfer order (Qty) Post Goods issue

Transfer order contains:

- Material Number

- Quantities to be

removed

- Source storage bin

- Destination storage

Goods Issue

• As soon as the goods leave the company, the shipping business activity is

finished. This is illustrated using goods issue for outbound deliveries.

Effect of Goods Issue posting

1. Enters status information in the outbound delivery

2. Reduces inventory stock

3. Posts the value change to the stock accounts in inventory

accounting

4. Updates the billing due list 5. Updates the document flow 6. Reduces delivery requirements

Billing

• Last step in the standard OTC Cycle

SD Process: Billing Documents

• The billing document will

automatically create a debit

posting to your customer

sub-ledger account and

credit your revenue

account.

• It is at this point that the

sales process is passed over

to Financial Accounting to

await payment.

Structure of Billing Document

Billing document

Header section & item section

Header

+ Payer Number

+ Billing Date

+ Billing document Net Value

+ Document currency

+ Terms of payment & Incoterms

+ Pricing Elements

Item

+ Material Number

+ Billing Qty

+ Net Value of the individual item

+ Weight & Volume

+ Reference document number used for

billing document

Header

+ Payer Number + Billing Date

+ Billing document Net Value + Document currency

+ Terms of payment & Incoterms + Pricing Elements

Item

+ Material Number + Billing Qty

+ Net Value of the individual item + Weight & Volume

+ Reference document number used for billing document

Billing can be created in two ways:

1. Individual Billing Document

2. Processing Billing Due List

• The Billing Due List is a list of sales documents that are ready to be processed. Example: All deliveries and orders that have been processed for the day (i.e. post goods have been issued) will be invoiced when the Billing Due list is processed.

The next screen will display all of the documents ready to be

billed that fit the criteria given. All the lines are automatically

highlighted for billing. To unselect them, you can use the

Deselect all button.

• Billing document type controls the entire billing document. Different types of billing types are:

1. F1 – Delivery related invoice 2. F2 - Delivery related invoice

3. F5 – Pro forma invoice for sales order 4. F8 – Pro forma invoice for delivery 5. L2 – Debit memo

6. RE – Credit memo for return 7. S1 – Cancellation invoice

Billing Methods

Collective

Invoicing

Delivery based

Invoicing

Split

Invoicing

Invoice 9…92 Invoice 9…91

Effects of Billing

1.The billing document status in all the related

documents

2.The customer credit account

3.Sales statistics

SD Process: Payment

• Payment is the final step in the sales order process, this

step is managed by the Financial Accounting department

• Final payment includes:

– Posting payments against invoices.

– Reconciling differences between payment and invoice.

• Payment will create a posting clearing the liability in the

A/R account and decreasing your bank account.

Document Flow

• The document flow feature allows you to find the

status of an order at any point in time.

• The SAP system updated the order status every time

a change is made

Sales Order: Backward Scheduling

Requested

Delv. Date

Goods

Issue

Loading

Material

Availability

Order

Date

Transp.

_Sched.

Transit

Time

(2 days)

Loading

Time

(1 day)

Pick & Pack

Time

(2 days)

Transp.

Sched.

Time

(1 day)

2nd

3rd

4th

5th

6th

1st

Sales Order: Forward Scheduling

Transit

Time

(2 days)

Loading

Time

(1 day)

Transp.

Sched.

Time

(1 day)

New

Delv.

Date

1st

2nd

3rd

4th

5th

6th

Pick & Pack

Time (2

days)

7th

Requested

Delv.

Date

Goods

Issue

Loading

Material

Availability

Order

Sales Order: Availability Check

• Availability Check

– Determines the material

availability date

– Considers all inward and

outward inventory

movements

Availability Check

• Determines if the requested delivery quantity can be made available for

shipping in order to meet the customer’s requested delivery date

• Availability check is carried out at plant level. And it gives the material

availability date

• Added to this date is then the pick/pack time, loading time and the

transportation lead time to arrive at the goods issue date

• Shipping time or transit time is then added to arrive at the final delivery date

communicated to the customer

• It is possible to control availability check for sales documents and deliveries

separately

Important terminology in ATP

• Backorder Processing, is the processing of backorder which itself is a sales order not been

confirmed in full or not confirmed at certain delivery date.

• Rescheduling, is a proposal of how confirmed quantities assigned already to sales orders

may be assigned other orders having high priority.

• ATP takes into account all the movements into and out of the warehouse.

• The stock examined by ATP may be safety stock, stock in transfer, stock in Q.C., blocked

stock.

• The planned issues and receipts associated with ATP are purchase orders, purchase

requisitions, planned orders, productions orders, reservations, dependent reservations, dependent requirements, sales requirements and delivery requirements.

• For special stock such as consignment or MTO, ATP may be carried out against special stock.

• Replenishment lead time is the time taken for material to become available. It is used only

Elements of Availability Check

• Checking Group, defines whether the requirements are the summed up requirements daily or

weekly or whether they are individual requirements

Continued…

Continued….

• Schedule Line Category, Like TOR the availability check can be switched off at schedule line

category when it is maintained at requirement class level.

• Delivery Item Category, can be used to control whether availability check takes place in

Sales Order: Credit Check

• Allows your company to manage its credit exposure and risk for each

customer by specifying credit limits.

• During the sales order process the system will alert the sales rep about

the customers credit situation that arises, if necessary the system can be

configured to block orders and deliveries.

Pricing Procedure Determination…

Sales Area

Customer Pricing

Procedure

Document Pricing

Procedure

Pricing

Procedure

Prerequisites for Automatic Pricing

• Condition records must already exist in the system for each

of the condition types that you want the system to apply

automatically.

• Where necessary, data must be maintained in the

corresponding customer and material master records.

Condition type controls

• Condition class

• Calculation type

• Rounding rule

• Structured condition

• Group condition

• Manual entries

• Header / Item condition

• Delete

• Value

• Valid From / To

• Reference condition type

• Pricing procedure

• Condition Index

• Condition update

• Scale basis

• Scale type

• Accruals

Other condition types and know how’s about pricing…

• Minimum order value

• Customer Expected Price

• Condition Exclusion

• Pricing reports

• Pricing analysis

• Net Price Lists

• Pricing Simulation

• Condition Supplement

• Pallet Discounts

Types of free goods

Inclusive:

• The customer pays only for part of the goods.

• The rest of the goods are free

• The unit of measure should be the same as

purchase quantity

• Ex: For 25 washing machines, 1 washing

machine is free. The customer gets 25 items

and pays for 24 items.

Types of free goods (contd…)

Exclusive:

• The customer pays for the goods ordered and

gets some additional items

• The unit of measure need not be the same as

the purchase quantity

• Ex: If a customer buys 25 washing machines,

he can receive one microwave oven also

Company is offering 3 units of free goods for 100 units

ordered. Customer orders 212 units.

• Pro rata: Free goods quantity is rounded. Free goods quantity =

212*3/100 = 6.36 = 6 (after rounding)

• Unit reference: Ordered quantity is rounded down as per

condition record quantity. Free goods quantity = 200 (rounded

down)*3/100 = 6

• Whole units: checks if ordered quantity is multiple of condition

record quantity. Free goods quantity = 0 as 212 is not multiple of

100

Limitations of free goods..

• Free goods can only be supported on a 1:1 ratio. Agreements in

the following form are not supported: 'With material 1, material 2

and material 3 are free of charge' or 'If material 1 and material 2

are ordered at the same time, then material 3 is free of charge'.

• Free goods are not supported in combinations with material

structures (for example, product selection, BOM, variants with

BOM explosion).

• Free goods are only supported for sales orders with document

category C (for example, not quotations).

• Only an order item can lead to a free goods item. Free goods are

not supported for deliveries without reference to a sales order.

• Free goods cannot be used in make-to-order production, third-party

order processing and scheduling agreements.

How FI sees free goods…

• Scenario I

Mlt : Not influenced by free goods

Slt: Pricing deactivated, VPRS configured as costs

• Scenario II

Mlt: Not influenced by free goods

Slt: Pricing activated for item category TANN with

characteristic B in pricing procedure

• Scenario III

Mlt: Cumulated calculation price transferred as costs

Slt: Pricing deactivated

Material Determination

• Substituting one product with another product is called

material determination.

• Material Determination uses condition technique to

substitute one material by another in the sales order when

certain conditions are met.

Material Determination can be used when_

– Customer specific product numbers with your own

material numbers

– Substituting discontinued materials with newer

materials

– Seasonal products

Substitution Reason

A substitution reason is a rule that controls the material

determination’s execution. With this reason we can specify, for

example:

– What products should be printed in documents,

such as an order confirmation

– You can control whether the system issues a

Substitution Reason

Strategy- Controls whether product selection should occur automatically in the background or whether the alternative materials should be offered for selection in a dialog box.

Outcome- It controls whether the outcome of product selection should replace the original entry or whether it should be recorded as a sub-item of the original item.

Maintain Condition record (VB11)

We maintain condition record as which material is going to

replaced by which material.

Restrictions

• Substitution is not supported for the_

– Stock transport orders (STO)

– Special order types such as make-to-order

(MTO), purchase-to-order (PTO), third-party

order (TPO) and consignment

– Contracts, inquiries and quotations

– Substitution is not supported for materials with

different base units of measure (UOM)

While creating sales order the system first checks_

– If the material is allowed for sales area the order

placed in.

– Then it checks if the material is excluded for that

customer.

– Lastly it checks if the material is in list of allowed

materials for that customer.

Make-to-Order (MTO)

• In MTO, production starts once a confirmed order for products is received

• Production order is linked a sales order

• MTO is the most appropriate approach used for highly customized or

low-volume products. E.g. High-end motor vehicles and aircraft

• The product is based on a standard design, but component production

and manufacture of the final product is linked to the order placed by the

final customer's specifications

• Special measures should take to reduce the risk of inefficiency and

wastage.

Make-to-Stock (MTS)

• MTS is a production (In advance) approach against a sales forecast, and sale

to the customer happens from finished goods stock

• MTS is the most appropriate approach used for normal and standard or

high-volume products. E.g. The grocery and retail sectors

• Orders are the result of production planning, which in turn is based on a

sales forecast

• Inventory permits economies of scale & protects against stock-outs due to

variability of inflows & outflows

• MTS leads to an evenly spread production schedule which is good for

efficiency and effectiveness.

Special Business Transactions….

• CASH SALES

• RUSH ORDERS

• CUSTOMER COMPLAINTS

• INVOICE CORRECTION REQUEST

• FREE OF CHARGE DELIVERY

• SUBSEQUENT FREE OF CHARGE DELIVERY

Cash Sales

•Purpose

• This scenario deals with cash only payment transaction for the sales of

material to a customer.

• The cash sales process is used when the customer places the sales order

and picks up and pays for the goods at the same time. The system

automatically proposes the current date in the sales order as the date

for the delivery and billing. Once the sales order is saved, the system

automatically creates a delivery.

•Benefits

• Sales and delivery are created in one step

• Optional batch management

•Key Process Steps

• Creation of sales order and delivery (automatically)

• Check batches (optional)

• Post goods issue

• Billing

Rush order and cash sales more or less same like cash sales system generates delivery document as soon as the end user saves the document.

In the rush order processing the customer places the order and collects the items immediately or we ship the materials immediately. However, we only invoice the customer later.

The system automatically creates a delivery when we save the sales order, but no invoice is printed. Instead, the system follows the standard procedures for

Credit Memo Request

1. The customer discovers the products we sent him are defective, and the costs to initiate a return delivery would exceed the costs obtained rehabilitation or repair of the product.

2. The customer is overcharged for a product or service and we issue a credit for the difference.

Once the customer receives the material and finds faulty or damaged material in the shipment, then the customer informs about the loss that he incurs. Then the business can compensate the customer for damaged goods by raising credit memo with reference to credit memo request.

Credit Memo Request:

• Need not have a reference • Enter a reason for evaluations • Always come with a billing block

• Accounting documents are updated after posting • Rejected items are available for revaluation

Debit memo request

When the business incurs loss in a transaction then the business should be

compensated by the customer in the form of debit memo with reference to debit memo request

Business scenarios:

Quantity difference: It can be used when a customer complaints for the damage. Ex: Damaged quantity or high price. The system corrects the quantities to be

billed via the debit memo item.

Price difference: When the business incurs loss. Then the business also can be

Invoice Correction Requests

• Can be created only with reference to a incorrect billing document • A Credit and Debit Memo is generated for each item

• Changes are made to the debit side • Net value is either credited or debited • Remaining items are deleted in pairs

When the business wants to send samples to the customers then the business can map the scenario with the free of charge deliveries.

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Consignment Process

• Consignment goods are goods which are stored at the customer location but which

are owned by your company.

• The customer is not obliged to pay for these goods until they remove them from

consignment stock. Otherwise, the customer can usually return consignment goods

which are not required.

• Customers store the consignment goods at their own warehouses. The customer can

access the goods in the consignment warehouse at any time.

• They are only billed for the goods when they are removed from the warehouse and

only for the actual quantity taken.

• Since consignment stocks still form part of your valuated stock, you must manage this

stock in your system.

Phases in Consignment Process

• Consignment Fill – up • Consignment Issue • Consignment Returns • Consignment Pick – up

Consignment Fill-up

Consignment Fill-up is nothing but filling up the goods

i.e., keeping the goods at the place of the consignee for sale. For this reason, you will be having an order, delivery, PGI but not billing. Since you are not selling the goods to the customer, billing is not involved

• The relevant quantity is removed from regular inventory in your plant and is added to the special stock for the customer. The total valuated stock for the plant remains the same. • The transaction is not relevant for pricing since the consignment stock remains the

Consignment Issue

• Consignment issue enables the customer to take consignment goods from the special stock for their use or to sell.

• Consignment issue involves removing the goods from the special stock and making it the property of the customer.

When the customer removes consignment stock to use or sell, you record the transaction in the system by creating a consignment issue order (order type KE). As a result, the system carries out the following actions:

• When goods issue is posted, the relevant quantity is deducted from both the customer’s special stock and your own total valuated stock.

• The transaction is relevant for pricing since the goods now become the property of the customer.

Consignment Return

• Consignment returns are used for when your customer wants to return goods to the consignment stock

• If the customer wishes to claim on consignment goods which have already been issued, you can record this transaction by creating a consignment return order (order type KR). As a result, the system carries out the following actions:

• When goods issue is posted, the relevant quantity is added to the customer’s special stock at the plant where the goods are returned

• Since the ownership of the goods is passed from the customer back to your company, the transaction is relevant for billing. In this case, the customer receives a credit memo for the returned goods.

Consignment Pick Up

• Any consignment goods stored at the customer’s warehouse that haven’t been used can be reposted to your company’s warehouse with a consignment pick-up

• If the customer returns consignment stock to you, you record the transaction in the system by creating a consignment pick-up order (order type KA). As a result, the system carries out the following actions:

• When goods issue is posted, the relevant quantity is deducted from the customer’s special stock and is added back into your regular stock at the plant where the goods are returned. Your total valuated stock remains the same since the returned stock was regarded as part of your own inventory even while it was at the customer’s premises