Sales Order Management in SAP R/3

1. Sales Order Management in SAP R/3 Adapted by Nik Dalal, OSU from material created by Bret Wagner, WMU And SAP America Plug-and-Play grant The order to cash process

2. Sales Order Cycle Sales Order Processing Pre-Sales Activities Inventory Sourcing Payment Billing Delivery

3. SAP R/3 SD module • SD: Sales and Distribution • Integrated with: • Materials Management (MM) • Production Planning and Execution (PP) • Financial Accounting (FI)

4. R/3 Organizational Elements • Configurable structures within the software that represent the legal and/or organizational views of an enterprise • Organizational elements form a framework supporting all business activities in the manner desired and selected for a given instance of the software

5. SAP R/3Organizational Elements • Client • Company Code • Sales Organization • Distribution Channel • Sales Division • Sales Area • Plant • Storage Location • Shipping Point “An essential characteristic of the SAP R/3 standard business program is the strict adherence to a formal structure of data. In no other way is it possible to build and maintain the very large system of databases and transactional processing routines that a modern integrated system demands. The structure of SAP R/3 is designed to be adaptable to the structure of all common configurations of head office and subsidiary operating units. The standard software is not itself altered when it is implemented in a company: only the tables of parameters that control it so as to make it fit your specific organization and its data processing requirements. There must be a set of definition of terms to ensure that everyone understands what the titles of the organizational units stand for.” SAP R/3, page 530.

6. Client • The highest level in an SAP R/3 instance • A self-contained unit with a separate set of master records and its own set of configuration tables • An instance can have more than one client • Training Client • Testing Client • Production Client

7. Liabilities & Owners Equity Assets Company Code • Represents an independent legal accounting unit • Balanced set of books, as required by law, are prepared at this level • A client may have more than one company code • United States • Europe • India • China

8. Sales Organization • A sales organization is responsible for negotiating sales conditions and distributing goods and services. • It represents the top organizational level to which you sum sales figures. There must be at least one sales organization defined • A sales organization is assigned to only one company code. • More than one sales organization can be assigned to a company code.

9. Sales Organization Distribution Channel Wholesale Retail Direct Distribution Channel • A Distribution Channel is the way sales materials reach the customer. • A distribution channel can be assigned (serve) to more than one sales organization. • Distribution Channels allow for different conditions such as minimum order quantities and pricing.

10. Sales Organization Divisions Product Line 1 Product Line 2 Product Line 3 Sales Division • Divisions are used to present product lines. • At least one division must be defined. • Divisions can be assigned to more than one sales organization. • Divisions restrict access to materials, so care should be exercised in defining divisions. • Examples • Motorcycle • Accessories

11. Sales Organization 1 Distribution Channel 1 Distribution Channel 2 Division 1 Division 2 Division 1 Sales Area • A Sales Area is a valid combination of Sales organization, Distribution Channel and Division. • Customer Master Data and Sales Documents are linked to sales areas. • Simple organizational structures are usually preferred to complex ones.

12. Fitter Sales (##FS) Wholesale (WH) Direct (DI) Snackbar (SB) Snackbar (SB) Fitter Snacker Sales Organization

13. Plant • A physical or logical site where value is added • A plant can be a • Production facility • Warehouse • Distribution vehicle

14. Storage Location 009 Storage location 0001 Storage location 0002 Storage location 0003 Storage Location • A subdivision of a plant where inventory is managed.

15. Shipping Point • A shipping point is a fixed location that carries out shipping activities. It may be a loading dock, a mail room or a shipping department. Each delivery is processed by only one shipping point • One plant can have multiple shipping points. • A shipping point can serve multiple plants. • Lead times for determining delivery dates are associated with shipping points.

16. Customer Order Cycle Sales Order Processing Pre-Sales Activities Inventory Sourcing Payment Billing Delivery

17. Pre-Sales Activities • There are two categories of presales activity: Sales Support and Pre-sales Documents. • Sales Support allows for tracking of customer contacts by including sales visits, phone calls, letters and direct mailings. Mailing lists can be generated based on specific customer characteristics. Basically an Integrated CRM system. • Pre-sales contacts include inquiries and quotes. • Inquiries document customer requests for information (“how much is . . .”, “is the product in stock . . .”) • Quotes are binding documents to a customer offering a specific quantity of material at a specific price if accepted within a specific period. • Both Inquiries and Quotes can be used as a starting point to create a customer order.

18. Sales Order Processing • Customers place orders with a customer service representative who create a document* with information on: • Customer • Material Ordered - material and quantity • Pricing conditions for each item • Schedule lines - delivery dates and quantities • Delivery Information • Billing information • Information is pulled from master data on customers and materials to minimize data entry errors. *Electronic Capture of a Business Event

19. Inventory Sourcing • Inventory Sourcing determines: • If a product is available (availability check). • How the product will be supplied: • From stock on hand. • From production or purchase orders that should be available. • From make-to-order production. • Shipped from an external supplier. • Shipped from another plant or warehouse.

20. Inventory Sourcing • Inventory sourcing occurs when: • An order is created. • An order is changed. • When the delivery document is created.

21. Delivery • Delivery activities include: • Creating delivery documents • Creating transfer orders for material picking • Provide packing information (if required) • Goods issue (updating accounting and inventory data)

22. Billing • A Billing Document is created by copying information for the sales order and delivery document into the billing document which is used to create the invoice. • Creating a Billing Document will automatically debit the customer’s accounts receivable account and credits the revenue account. Postings may also be made to other accounts.

23. Payment • Payment is the final step in the customer order management cycle. • Final payment includes: • Posting payments against invoices. • Reconciling differences, if necessary. • The Cycle may not always go as planned (material not in stock, defective material returned for credit, etc.). SAP has procedures to deal with these possibilities.

24. Pre-Sales Pre-Sales Contact Sales Order Processing Billing Inventory Sourcing Delivery/ Transportation Delivery/ Transportation Inventory Sourcing Sales Order Processing Billing Inquiry Scheduling agreement Contract Quotation Production Planning Production Planning Order Materials Management Materials Management Sales Information System Sales Information System Delivery Goods issue Transfer Order Shipment Invoice Payment/ Accounting Payment/ Accounting Material Stock Account Accounts Receivable Order Management Process

25. Delivery Invoice Order Accounting Document Flow of a Sales Order Order 900 . Delivery 50000672 . . WMS transfer order 100000828 . . GD goods issue: delivery 40000184 . . Invoice 90000376 . . . Accounting document 100000269 Document Flow • The sales order management process consists of a chain of steps. Each step in the process causes the creation of a document which can be used to track the progress of the sales order. All changes to documents (sales orders, delivery, etc.) creates a document to keep track of the changes.

26. Document Flow

27. Customer Master Material Master Pricing Master Customer Master Material Master Pricing Master Master Data • Master Data is centrally stored (shared across application modules) and is processed to eliminate data redundancy. • When creating business transactions (like a sales order) the R/3 system copies information from master data. • Three kinds of master data are critical to sales order processing: • Customer - Shared with FI/CO • Material - Shared with MM and PP • General Ledger • Pricing

28. Customer Master • Contains all the customer related data necessary for processing orders, deliveries, invoices and customer payments • Customer Master contains all relevant data regarding business partners • Sold-to party • Ship-to party • Bill-to party • Payer

29. Material Master • Contains all data required to define and manage a specific item of material • Integrates data from • Inventory Control (MM) • Manufacturing (PP) • Sales and Distribution (SD) • Accounting (FI and CO) • And other departments • Each user has a unique view

30. General Ledger • A book of accounts and their respective balances • The primary information record for Financial Accounting (FI) • Contains the information required to prepare financial statements • The General Ledger provides a complete record of all acceptable business transactions

31. Pricing • Pricing is carried out automatically based on predefined prices, discounts, and surcharges • Highly customizable within SAP R/3

32. Customer Master Sold-to party 2540-00 Item Material Quantity 1 1400-500-00 30 2 1400-100-00 20 Material Master Creating an Order • When a sales order is created in R/3, data is copied from: • Customer Master • Material Master • Condition Records for Pricing • Tables in Configuration for shipping point and route. • Data can also be copied from an inquiry or quote.

33. SP 1 SP 2 SP 3 Plant Shipping Point Route Customer Shipping Point and Route • The Shipping Point is the logical or physical location where deliveries are created and managed (see Organizational Elements). • The Route is the path that the delivery follows from the plant to the customer site. • Delivery dates are determined based on lead times associated with the shipping point (picking and packing time) and route (transportation lead times and transit times)

34. Requested Delivery Date Material Availability Date Transportation Planning Date Goods issue date Loading Date Order Date Transit Time Loading Time The R/3 System uses the longer of these two times in calculating delivery scheduling. Pick Pack and Stage Transportation Lead Time Stock Available: Backward Scheduling

35. Confirmed Delivery Date New Material Availability Date Transportation Planning Date Goods issue date Loading Date Order Date Transit Time Loading Time The confirmed delivery date is derived by the R/3 System using forward scheduling based on the new material availability date Pick Pack and Stage Transportation Lead Time Stock Unavailable: Forward Scheduling

36. Complete Delivery Delivery Sales Order Partial Delivery Delivery Sales Order Delivery Delivery Order Combination Sales Order Delivery Sales Order Delivery • A delivery can be created for each sales order. • Sales orders may split into multiple deliveries (availability). • A delivery may combine a number of sales orders for efficiency. • Combined sales orders must have something in common like shipping point, delivery processing date, ship-to party or route.

37. Picking Process * not mandatory

38. Invoice Split Invoice Delivery Sales Order Invoice Separate Invoice per delivery Sales Order Invoice Delivery Invoice Delivery Collective Invoice Delivery Sales Order Delivery Invoice Delivery Sales Order Billing • Invoice splits can be used to bill for different items like materials and services. • Collective invoices can be used to consolidate deliveries onto one invoice to minimize paperwork.

39. Invoice 1 Acme Corp. 4325 Pay to $ Dollars First National Bank 2132 123123 54545 345 34 Invoice 2 Invoice 3 Invoice 4 Posting Payments • Customers may send one check to cover multiple invoices. They may also send checks for less than the full amount due. SAP allows for partial payments to be applied to invoices. • Payment posting is performed by the accounts receivable department.

40. West HillsAthletic Club Fitter Snacker Exercise Sales Order Inquiry Sales and Distribution 1 2 Pricing Availability

41. Fitter Snacker Exercise Goods Issue Pick 4 5 Materials Management Sales Order Delivery Delivery Delivery 3

42. West HillsAthletic Club Fitter Snacker Exercise Invoice Sales and Distribution Delivery 6 Accounts Receivagle 7 Post Receivable Receivable