Sales & Distribution Processes EGN 5620 Enterprise Systems Configuration Spring, 2012

Sales & Distribution ProcessesEGN 5620 Enterprise Systems ConfigurationSpring, 2012

Sales & DistributionProcessesTheories & Concepts

When you create/change a sales document, such as adding schedule lines or rescheduling, delivery scheduling should be carried out for all the schedule lines, new and old. • You can specify for each sales document type that the system is to schedule deliveries • Backwards and/or • Forwards. Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Working times in the shipping point can be in the unit of hours or days • Each ERP maintain different working times in the shipping point, and unit time specification including hours, minutes, and seconds. Delivery Scheduling Terminology © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

You can also enter the factory calendar of the forwarding agent for the route when you define the transit time. This factory calendar can be different from your company's calendar. • For example, the forwarding agent might operate a 6-day-week. • You may only enter the transit time in days with two decimal places, even if you have maintained the working times in the shipping point. Delivery Scheduling Terminology © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

If you cannot backward schedule, the system will forward schedule for you. • For example, • The material is available on the 2nd of the month • By forward scheduling, we can schedule the pick and pack activity for: 2 days: 4th • Loading time is 1 day: 5th • Given 2 days of delivery time: the customer can have the goods on the 7th. Delivery Scheduling Terminology © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Requested Delv. Date New Delv. Date Order Date Material Availability Transp. Sched. Goods Issue Loading 1st 2nd 3rd 4th 5th 6th 7th Transp. Sched. Time (1 day) Loading Time (1 day) Transit Time (2 days) Pick & Pack Time (2 days) Forward Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Backward scheduling calculates backward from the requested delivery date: • In this example below the requested date is the 6th • Transit time is 2 days – 4th • Loading time is one day – 3rd • Pick and pack and transportation scheduling can be done simultaneously: the longer of which is 2 days – 1st Delivery Scheduling Terminology © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Material Availability Loading Transp. Sched. Order Date Goods Issue Requested Delv. Date 5th 1st 2nd 3rd 4th 6th Transit Time (2 days) Transp. Sched. Time (1 day) Loading Time (1 day) Pick & Pack Time (2 days) Backward Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

During order entry, each schedule line for an item can contain a requested delivery deadline. The goods should arrive at the customer on this date. At the order processing stage, the system schedules when the essential shipping activities such as picking, loading and transporting must be started so that the requested delivery date can be kept. This is called backward scheduling. • If backward scheduling results in a date in the past for any shipping activity, or if the material will not be available on the date calculated. The system will carry out forward scheduling to determine the earliest possible shipping deadline, Backward vs. Forward Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Sales & Distribution ProcessesSAP Implementation

Accounts Receivable Sales Order Pre-Sales Activity Delivery Billing Availability Check Goods to Delivery Inventory Postings General Ledger Accounts In Inventory Plant or Warehouse YES NO Goods from Purchase Order Accounts Payable Purchase Requisition Purchase Order Goods Receipt Invoice Receipt Pen Incorporated Procure for Sales Order © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Integration Sales Order Process(Order-to-Cash) Check Availability Sales Process Sales Order Entry Pick Materials Pre-Sales Activities Pack Materials Post Goods Issue Receipt of Customer Payment Invoice Customer © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Engage in pre-sales activities • Create quotations and send to customers • Create sales orders, item proposal, or scheduling agreement • Create delivery note • Create/send invoice to customer (billing) • Receive/post payment from customer • Handle sales order return Activities in SD Process © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Pre-sales Activities: • Initiate customer contacts and communications (sales activity) via: Phone call records On-site meeting Letters Campaign communication • Implement and track • direct mailing, • internet, and • trade fair campaigns based on customer attributes Pre-sales documents : Inquiries and Requests for Quotation. SD1: Engage in Pre-Sales Activities

SD2: Create quotation to customer 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 time frame at a pre-defined price.

The customer material information records is used to store data on a material defined for each specific customer. • It contains customer-specific: • Material number, • Material description, and • Data on deliveries and delivery tolerances Customer-Specific Material Info Record © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Creation of a Sales order can be originated from a variety of documents or activities such as: • Quotations, • Existing Contract, or • Customer contacts for order via phone, internet, email • Sales order should contain the following basic information: • Customer Information • Material/service and quantity • Pricing (conditions) • Specific delivery dates and quantities • Shipping information • Billing Information SD3: Create Sales Order

If a customer frequently orders the same combination of materials, SAP can store the frequently used data as an item proposal in the system. • While processing a sales order, the user can copy all or some of the materials and quantity data from the item proposal directly into the sales order (document) • Item proposal can be assigned to one or multiple customer master records Sales order: Item Proposal © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Often used in a JIT environment for suppliers to deliver a material on a delivery schedule pre-agreed upon with the customer (user). • During creation, availability is checked and quantities are passed to MRP, which routinely releases the quantity for each material at a regular time interval. Sales order: Scheduling Agreements © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Delivery 02/10 150 Scheduling Agreement Date Qty 02/15 150 05/15 150 08/15 150 11/15 300 Delivery 05/10 150 Delivery 08/10 150 Delivery 11/10 300 Scheduling Agreements © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

SD3: Create Sales Orders • The sales order document is made up of three primary areas: • Header Data relevant for the entire sales order: customer data, total cost of the order, number of the sold-to party, number of the ship-to party and the payer, document currency and exchange rate, pricing elements for the entire document, delivery date and shipping point 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

Item Data • Whereas data in the document header applies to all items in the document, some data applies only to specific items. This data is stored at item level and includes the: • Material number • Target quantity for outline agreements • Number of the ship-to party and the payer (an alternative ship-to party or payer can be defined for a particular item) • Plant and storage location specifications • Pricing elements for the individual items • Schedule line data SD3: Create Sales Order © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

A sales order contains all of the information needed to process customers request. As each sales order is being determined, the following steps are performed: • Pricing • Credit limit check • Availability Check • Delivering Schedule • Shipping point and route determination • Transfer of requirements to MRP • foreign trade and license processing SD3: Create Sales Order

SAP displays pricing information at both the header and the line item level for sales order. • Header pricing is valid for the whole order it is the cumulative of all line items within the order • Line item pricing is for each specific material. • It shows gross to net pricing for materials SD3-1: Pricing

Enabling the users to program varied pricing procedures to meet individual organizations needs. • The pricing is extendible: can be attached, or extended to external pricing programs or elements outside SAP for pricing. • It also allows Gross to Net pricing: This allows discounts and reductions from the ‘master’ price. SD3-1: Pricing © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

It is an efficient means for credit management • It is integrated with Financial Accounting (FI) -- Via credit control area • It automatically alerts when a credit check fails • It is a part of comprehensive credit management reporting SD3-2: Credit Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

A large number of outstanding receivables or bad debts can have a considerable impact on company performance. • Minimize credit risk by defining a credit limit for customers by using Credit Management. • This is especially important, when doing business with customers in financially unstable sectors or countries, or trade with countries that are politically unstable or that adopt a restrictive exchange rate policy. SD3-2: Credit Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Credit Management enables you to assign a credit limit to each customer (even a non-SAP system is used for sales and distribution processing), if the Accounts Receivable (FI-AR) application component is implemented to manage your receivables. • When an invoice is posted (in FI-AR), SAP checks whether the amount exceeds the credit limit. Facilities like the credit master sheet or early warning list help you monitor the customer’s credit situation. SD3-2: Credit Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

If both the Accounts Receivable (FI-AR) and Sales and Distribution (SD) application components are implemented, we can customize when at what point of order, delivery, goods issue and so on and to what extent a check on the customer’s credit limit is to take place by the system. • We can define automatic credit limit checks according to a range of criteria and in line with the company’s requirements. SD3-2: Credit Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Credit representative is automatically alerted to a customer’s critical credit situation as soon as order processing starts. • Credit representatives are able to check a customer’s credit situation quickly and reliably, and, in line with the appropriate credit policy, to decide whether the customer should be granted credit. • Relevant employees can also be automatically notified of critical credit situations via internal mail. SD3-2: Credit Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Credit Management can work in a distributed system, which is one with central financial accounting and non-central sales and distribution on several sales and distribution computers. • Credit and risk management takes place in the credit control area, while Credit limits and credit exposure are managed at both credit control area and customer level. • According to corporate requirements, you can implement credit management that is centralized,decentralized, or somewhere in between. SD3-2: Credit Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

For example, if your credit management is centralized, you can define one credit control area for all of your company codes. • On the other hand, if your credit policy requires decentralized credit management, you can define one credit control area for each company code or each group of company codes. SD3-2: Credit Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

SD3-3: Availability Check Availability Check • Determines the material availability date • Considers all inward and outward inventory movements 3 methods of delivery • One-time delivery ( on- time one-time delivery) • Complete delivery (possibly delayed one-time delivery) • Delayed proposal (allows partial delivery schedule)

Availability check may influence partial deliveries by: • Proposing a quantity that can be delivered on the requested date (complete delivery); otherwise, • Determines the earliest date for full delivery, or • Determines the number and dates for partial deliveries to fulfill the order SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

The following stock types can be included in the availability check • Safety stock • Stock in transfer • Quality inspection stock • Blocked stock • Restricted use stock • All movements of stock SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Inward/Outward movement of goods • purchase orders • purchase requisitions • planned orders • production orders • reservations • dependent reservations • dependent requirements • sales requirements • delivery requirements SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

While entering a sales order, you can only confirm the delivery of the goods for the required delivery date if the goods are available for all the necessary processing activities which take place before delivery. • The shipping department must ensure that freight forwarding or another shipping company is advised early enough so that sufficient time remains for packing and loading to be carried out. An availability check can be carried out on the deadline date for availability for the goods. SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

During the sales document processing, if the goods ordered by the customer are not available on the requested date, the system branches to a further screen where delivery proposals are offered for selection. • The system determines these proposals on the basis of the availability situation. This screen also provides with information on the scope of the check, the current ATP quantity, and the availability situation across all plants. SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

One-time delivery • Deliver on the requested delivery date • In this section, SAP checks whether the requested delivery date can be kept to. If stock of the material is available to make a delivery on the requested delivery date, the stock quantity is confirmed here. • If there is no stock available, confirmed quantity zero is displayed. SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Complete delivery • In this section, SAP checks whether there will be sufficient stock for complete delivery at a later date: • If there is sufficient stock available at a later date to cover the required quantity in the sales document, the system proposes the date here. • If the system determines that complete delivery cannot be made at a later date, no date is proposed in this section. SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Delayed proposal • In this section, SAP checks whether and for which dates partial deliveries can be made. Partial deliveries are displayed for different dates. These dates are based on the planned inward and outward movements of stock. • During an availability check, SAP does not take replenishment lead time into account • SAP displays the dates on which partial deliveries can be made with the available stock. SD3-3: Availability Check © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Automatic scheduling of essential shipping activities • Calculation uses defined activity times • Resulting in scheduled activity dates • Determined using backward and forward scheduling rules SD3-4: Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Terms used in scheduling are defined below. Transit time is the time in days that is required to deliver goods from your premises to the customer location. It is defined for a route. Loading time is the time in days that is required for loading a delivery item. It is determined from the shipping point, the route, and the loading group of the material. Pick/pack time is the time in days that is required for allocating goods to a delivery as well as the time in days that is required for picking and packing. It is calculated using the shipping point, the route, and the weight group of the order item. Transportation lead-time is the time in days that is needed to organize the shipping of the goods. This might include booking a ship and reserving a truck from a forwarding agent. It is defined for a route. SD3-4: Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

The following deadlines are of importance for delivery processing: Material availability deadline: must start picking and packing activities on the material availability deadline. This deadline must be selected early enough in advance so that the goods are ready by the given loading deadline. Transportation scheduling deadline: the date on which you must start to organize the transportation of the goods. This deadline must be selected early enough to ensure that the means of transport is available by the loading deadline. SD3-4: Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Loading deadline: the date on which the goods must be available for loading and on which all vehicles that are required to ship these goods must be ready for loading. After the time required for loading the goods (loading time) has expired, goods issue can be carried out. Goods issue deadline: the date on which the goods leave the company in order to arrive punctually at the customer location. SD3-4: Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Delivery deadline: the date on which the goods are to arrive at the customer location. The difference between the goods issue deadline and the delivery deadline is calculated from the transit time required for the route between the delivering plant and the customer. The delivery deadline can be the customer's requested delivery deadline or the confirmed delivery date (that is, the earliest date on which you can deliver goods to the customer). SD3-4: Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

During order entry, each schedule line for an item can contain a requested delivery deadline. Goods should arrive at the customer on this date. At the order processing stage, the system can automatically schedule when the essential shipping activities such as picking, loading and transporting must be started so that the requested delivery date can be kept. SD3-4: Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

Sales & Distribution Processes EGN 5620 Enterprise Systems Configuration Spring, 2012