Sales Distribution Processes EGN 5620 Enterprise Systems

Sales & Distribution Processes EGN 5620 Enterprise Systems Configuration Spring, 2014

Sales & Distribution Process 1. 2. 3. 4. 5. 6. 7. Engage in pre-sales activities Create quotations and send to customers Create sales orders Schedule & deliver Bill customer (by invoice) Receive payment from customer Handle sales order return January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 2

Sales & Distribution Process SAP Implementation

Business Process Integration FI MM SD Master Data Rules FI MM SD FI FI

Pen Incorporated Procure for Sales Order Pre-Sales Activity Sales Order Delivery Availability Check Accounts Receivable Goods to Delivery In Inventory YES NO Purchase Requisition Billing Plant or Warehouse General Ledger Accounts Inventory Postings Goods from Purchase Order Goods Receipt Invoice Receipt January 2008 Accounts Payable © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 5

Business Process Integration SD Process January 2008 © SAP AG - University Alliances and

Integration SAP Sales Order Process (Order-to-Cash) Check Availability Sales Order Entry Sales Quotation Entry Pre-Sales Activities Receipt of Customer Payment Delivery Note & Pick Materials Sales Process Pack Materials Invoice Customer Post Goods Issue January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 7

SAP SD Process SD 1. Engage in pre-sales activities SD 2. Create quotations and send to customers SD 3. Create sales orders, item proposal, or scheduling agreement SD 4. Schedule delivery and create delivery note SD 5. Create/send invoice to customer (billing) SD 6. Receive/post payment from customer SD 7. Handle sales order return January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 8

SD 1: Engage in Pre-Sales Activities 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.

SD 2: 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 predefined price.

Customer-Specific Material Info Record 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 11

SD 3: Create Sales Order A sales order contains all of the information needed to process customers request. The process for creating a sales order has the following steps: SD 3. 1 SD 3. 2 SD 3. 3 SD 3. 4 SD 3. 5 SD 3. 6 SD 3. 7 Pricing Credit limit check Availability Check Delivering Schedule Shipping point and route determination Transfer of requirements to MRP foreign trade and license processing

SD 3: Create Sales Order 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

SD 3: Create Sales Order 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 14

SD 3: Create sales order: item proposal If a customer frequently orders the same combination of materials, SAP can store the frequently used data as an item proposal in the system. During sales order processing, 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 15

SD 3 -1: Pricing SAP can display pricing information at both the header and the line item level for sales order. It enables the user to program varied pricing procedures to meet individual organizations needs. The pricing is extendable; it 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.

SD 3 -2: Credit Check SAP provides an efficient means to implement credit management It is integrated with Financial Accounting (FI), via credit control area It automatically alerts when a credit check fails January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 17

SD 3 -2: Credit Check A large number of outstanding receivables or bad debts can have a considerable impact on company performance. The user may minimize credit risk by defining a credit limit for customers by using Credit Management. This is especially important if a company does 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. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 18

SD 3 -3: Availability Check ◦ Determines the material availability date ◦ Considers all inward and outward inventory movements Allow for 3 methods of delivery v. One-time delivery ( ontime one-time delivery) v. Complete delivery (possibly delayed onetime delivery) v. Delayed proposal (allows partial delivery schedule)

SD 3 -3: Availability Check In determining the material availability the following elements can be included in the availability check ◦ Safety stock ◦ Stock in transfer ◦ Quality inspection stock ◦ Blocked stock ◦ Restricted use stock ◦ All movements of stock January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 20

SD 3 -3: Availability Check Inward/Outward movement of goods ◦ purchase orders ◦ purchase requisitions ◦ planned orders ◦ production orders ◦ reservations ◦ dependent requirements ◦ sales requirements ◦ delivery requirements January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 21

SD 3 -3: Availability Check 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. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 22

SD 3 -3: Availability Check Complete delivery In this section, SAP checks whethere will be sufficient stock for complete delivery at a later date: v. 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. v. If the system determines that complete delivery cannot be made at a later date, no date is proposed in this section. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 23

SD 3 -3: Availability Check 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 which takes replenishment lead time into account, the date on which replenishment lead time ends is displayed if insufficient stock means that no partial deliveries can be made before replenishment lead time ends. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 24

SD 3 -4: Delivery Scheduling SAP can automatically schedule essential shipping activities, using backward and forward scheduling rules. It uses defined activity times to schedule delivery activities. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 25

SD 3 -4: Delivery Scheduling 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. © SAP AG - University Alliances January 2008 and The Rushmore Group, LLC 2008. All rights reserved. 26

SD 3 -4: Delivery Scheduling The following 5 deadlines are of importance for delivery scheduling: 1. 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. 2. 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. © SAP AG - University Alliances January 2008 and The Rushmore Group, LLC 2008. All rights reserved. 27

SD 3 -4: Delivery Scheduling 3. 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. 4. Goods issue deadline: the date on which the goods leave the company in order to arrive punctually at the customer location. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 28

SD 3 -4: Delivery Scheduling 5. 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). January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 29

SD 3 -4: Delivery Scheduling An item consists of one or more schedule lines. The schedule line contains all the data that is needed for a delivery. For example, a customer orders 20 units of a particular material which you enter as one item in the sales order. However, you can only deliver 10 pieces now and the remaining 10 pieces next month. So you need to schedule two deliveries. The data for these deliveries (dates, confirmed quantities) are stored in two separate schedule lines. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 30

SD 3. 4: Delivery Scheduling Structure of sales documents Header Line Item # 1 Schedule Line # 2 Line Item # 2 Schedule Line # 1 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 31

SD 3 -5: Shipping Point and Route Determination A shipping point is determined for each line item A delivery can only be processed from one shipping point Routes - route to be traveled & transit time are determined using customized rules Routes can be used to simply define transit time January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 32

SD 3 -6: Transfer of requirements to MRP • Sales order is transferred to MRP as a Customer Independent Requirement (CIR). If a deficit is found, SAP will propose a purchase req. or planned order to fulfill the shortage after running MRP or MPS. • Sales and distribution requirements reduce existing stock or inward movements of stock on the material availability date to ensure that other outward movement of stock elements cannot access the quantity reserved in this way. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 33

SD 3 -6: Transfer of requirements to MRP

SD 3 -7: Foreign Trade and License Processing Predefined trade areas — NAFTA, EU Automated reporting for trade areas Automated controls ◦ License management ◦ Embargo lists ◦ Control by customer, country, product, point in time January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 35

SD 4: Schedule delivery and create Delivery notes Initiates the delivery process Control mechanism for the process Changes to delivery are allowable - products, quantities Integrated with the Material Management (MM) and Finance (FI) modules Picking Packing Loading Post Goods Issue Delivery Note January 2008 Each step in the delivery process updates the delivery note status © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 36

Delivery/ Goods Issuing Reconciliation Account Sales quotation No impact on Financial Accounting (FI) Sales order Delivery/Goods Issuing Materials Management (MM) and Financial Accounting (FI)

SD 4: Shipping Sales Order 1 Sales Order 4 Sales Order 2 Delivery 8… 13 Sales Order 5 Delivery 8… 16 Delivery 8… 14 Delivery 8… 12 Order Combination Delivery 8… 15 Partial Delivery Complete Delivery

SD 5: Billing Overview SAP has the functions of processing credit/debit memos and rebates It automates invoicing, based on sales orders and/or deliveries It can create pro forma (paper) invoices It is integrated with Finance (FI) & Controlling (CO) It updates customer’s credit data January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 39

SD 5: Billing Sales Invoice Sold To: Rushmore Group Sales Org: S 001 Dist Channel: RE Division: 01 Conditions/Price: $120 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 40

SD 5: Billing Methods Delivery based Invoicing Delivery 8… 20 Invoice 9… 45 Delivery 8… 21 Invoice 9… 46 Order 6 Delivery 8… 33 Collective Invoicing Order 9 Delivery 8… 34 Order 14 Split Invoicing January 2008 Invoice 9… 68 Delivery 8… 56 Invoice 9… 91 Order 32 Delivery 8… 86 Invoice 9… 92 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 41

SD 5: Billing Documents It explicitly specifies documents Billing due list — builds a work list of invoices that should be generated Automatic posting to Financial Accounting (FI): debit to customer sub-ledger account and credit revenue account. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 42

SD 5: Billing Plans Periodic — total amount for a planned billing period Milestone — distributing the total amount over multiple billing dates - typically used with the project system (PS) Installment — evenly proportioned amounts and defined payment dates Resource related — consumed resources such as service or consulting January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 43

SD 6: Payment is the final step in the sales order process. SAP posts payments against invoices. The posting clears the liability in the A/R account and increases your bank account.

SD 7: Handle Customer Return Order received Delivery Note Sales Process Goods Receipt Payment to Customer Create Credit Memo January 2008 Quality Inspection © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 45

SD 7: Handle Customer Return 1 Order 14 Delivery 8… 56 Invoice 9… 68 2 Return Order Return Delivery Quality Inspection Return to Inventory Credit Memo Payment 3 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 46

SD 7: Handle Customer Returns document ◦ Billing block can be proposed ◦ Use the Order reason field to identify the reason for the return ◦ Full access to pricing and ability to re-price Return delivery ◦ Issues a goods receipt to place material into inventory January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 47

SD 7: Handle Customer Return Credit memo ◦ Billing block must be cleared from Return ◦ Posts to Financial Accounting (FI) ◦ Can be processed in batch (background) ◦ Can be processed collectively (grouped) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 48

Sales & Distribution Processes PEN, Inc.

Sales Quotation

Sales Order

SD Process: Billing Documents At this point that the sales process is passed over to Financial Accounting to await payment.

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 to any of the documents created in the customer order management cycle (Order to Cash). January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 53

Exercises: (Due date: 3/5/2014) 144 a. 144. 145. 146. 147. 148. 149. 150. 151. 152. 153. 154. 155. 156. 157. Create customer quotation Create sales order from sales quotation Check stock status Create delivery note for sales order Check stock status Picking materials on delivery note Post goods issue Check stock status Bill customer Post receipt of customer payment Review document flow Create Customer Material Info Record Create sales order using customer info record Create delivery for sales order Pick materials on delivery note

Exercises: (Due date: 3/5/2014) 158. 159. 160. 161. 162. 163. 164. 165. 166. 167. Post goods issue Bill customer Post receipt of customer payment Create a scheduling agreement Process deliveries for a scheduling agreement Display scheduling agreement Check stock status Bill customer Run customer credit check Post receipt of customer payment