1. Sales & Distribution Processes EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2011

2. Sales & Distribution Processes Theories & Concepts EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2011

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

4. 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.

5. 2: Create quotation to customer The quotation presents the customer with a legally binding offer: ◦to deliver specific products/service ◦in a specified time frame ◦at a pre-defined price.

6. 3-1: Create Sales Order A sales order contains all of the essential sales information. Sales order creation can originate from various documents and activities ◦From quotations ◦From existing contract ◦From direct customer contact, via phone, internet, email A sales order should contain the following data: ◦Customer Information ◦Material/service and quantity ◦Pricing (conditions) ◦Specific delivery dates and quantities ◦Shipping information ◦Billing Information

7. 3-2: Sales Order Creation Process The creation of a sales order involves the following steps: 1.Pricing 2.Credit limit check 3.Availability Check 4.Delivery Scheduling 5.Shipping point and route determination 6.Transfer of requirements to MRP 7.foreign trade and license processing

8. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.8 4-1: Schedule & delivery Picking Packing Loading Good issuing (releasing) Shipping Picking Packing Loading Goods releasing Delivery schedule Each step constrains its next step in the delivery process

9. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.9 Forward Scheduling Transit Time (2 days) Loading Time (1 day) Transp. Sched. Time (1 day) New Delv. Date 1st3rd4th5th6th2nd Pick & Pack Time (2 days) 7th Requested Delv. Date Goods Issue Loading Material Availability Order Date Transp. Sched.

10. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.10 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) 2nd3rd4th 5th 6th1st

11. 4-2: Picking Quantities to pick Date and time to pick Storage location to pick from Serial number/lot/batch number to pick from The picking operation may be done manually or automated via linking to a ASRS or automated warehouse.

12. 4-2: Loading and Packing Specify the loading mechanism. Specify packing method and materials for the packed item. Record returnable packaging materials and/or devices (such as pallet or tote box) Track the packed product (e.g. by container) Verify weight/volume limits and restrictions. Assign all packed items to the specified transportation means and location

13. 4-3: Goods Issue This is an event that indicates the legal change in ownership of the products Upon goods issued, inventory is updated. Cost of Goods Sold and the General Ledger (G/L) accounts should be updated.

14. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.14 5: Create/Send invoice to customer (Billing) An invoice is generated and sent to the customer. Credit/debit memos and rebates are considered. Customer’s credit data are updated The invoice may be generated and sent to the customer, manually or automatically.

15. 6: Payment Payment is the final step in the sales order process, this step is managed by the Financial Accounting department. Final payment posts payments against invoices. Payment will create a posting clearing the liability in the A/R account and increasing your bank account.

16. Sales Process January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.16 7: Handle Customer Return Customer Return Order received Goods Receipt Create Credit Memo Quality Inspection Payment to Customer Delivery Note

17. Sales & Distribution Process SAP Implementation EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2011 Sales & Distribution Process SAP Implementation EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2011

18. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.18 Business Process Integration FI MM SD Org Data Rules FI MM SD Master Data FI MM SD FISD MM

19. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.19 Pen Incorporated Procure for Sales Order Pre-Sales Activity Sales Order DeliveryBilling General Ledger Accounts Purchase Requisition Purchase Order Goods Receipt In Inventory Plant or Warehouse Invoice Receipt Availability Check NO YES Goods to Delivery Goods from Purchase Order Inventory Postings Accounts Receivable Accounts Payable

20. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.20 Business Process Integration SD Process

21. Sales Process January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.21 SAP Sales Order Process (Order-to-Cash) Integration 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

22. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.22 SAP SD Process 1. Engage in pre-sales activities 2. Create quotations and send to customers 3. Create sales orders, item proposal, or scheduling agreement 4. Schedule delivery and create delivery note 5. Create/send invoice to customer (billing) 6. Receive/post payment from customer 7. Handle sales order return

23. SD3: 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: 1.Pricing 2.Credit limit check 3.Availability Check 4.Delivering Schedule 5.Shipping point and route determination 6.Transfer of requirements to MRP 7.foreign trade and license processing

24. SD3-1: 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 extendible; 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.

25. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.25 SD3-2: 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

26. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.26 SD3-2: 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.

27. SD3-3: Availability Check Availability Check ◦Determines the material availability date ◦Considers all inward and outward inventory movements Allow for 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)

28. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.28 SD3-3: 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

29. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.29 SD3-3: Availability Check Inward/Outward movement of goods ◦purchase orders ◦purchase requisitions ◦planned orders ◦production orders ◦reservations ◦dependent reservations ◦dependent requirements ◦sales requirements ◦delivery requirements

30. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.30 SD3-3: 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.

31. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.31 SD3-3: Availability Check 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.

32. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.32 SD3-3: 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.

33. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.33 SD3-4: Delivery Scheduling SAP can automatically schedule essential shipping activities, using backward and forward scheduling rules. It uses defined activity times to schedule delivery activities.

34. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.34 SD3-4: 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.

35. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.35 SD3-4: 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.

36. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.36 SD3-4: 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.

37. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.37 SD3-4: 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).

38. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.38 SD3-4: 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.

39. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.39 SD3.4: Delivery Scheduling Structure of sales documents Header Line Item # 1 Line Item # 2 Schedule Line # 1 Schedule Line # 2

40. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.40 SD3-5: 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

41. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.41 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. SD3-6: Transfer of requirements to MRP

43. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.43 SD3-7: 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

44. SD3: 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

45. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.45 SD3: 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

46. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.46 DS3: 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

47. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.47 SD4: 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 Each step in the delivery process updates the delivery note status

48. Delivery/ Goods Issuing Reconciliation Account Sales quotation Sales order Materials Management (MM) and Financial Accounting (FI) Delivery/Goods Issuing No impact on Financial Accounting (FI) Dr Cr Inventory (Trading, F/G) $100 Dr Cr COGS $100

49. SD4: Shipping Order Combination Sales Order 1 Sales Order 2 Sales Order 3 Delivery 8…12 Partial Delivery Sales Order 4 Delivery 8…13 Delivery 8…14 Delivery 8…15 Complete Delivery Sales Order 5 Delivery 8…16

50. DS5: 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.50

51. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.51 DS5: Billing Sales Invoice Sold To: Rushmore Group Sales Org: S001 Dist Channel: RE Division: 01 Conditions/Price: $120 General Ledger Account Assignment Debit Credit CustomerA/R Recon 120 Revenue Debit Credit 120

52. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.52 DS5: Billing Methods Collective Invoicing Delivery based Invoicing Delivery 8…34 Delivery 8…33 Order 14 Order 9 Delivery 8…56 Invoice 9…68 Order 6 Delivery 8…20 Delivery 8…21 Invoice 9…45 Invoice 9…46 Split Invoicing Order 32Delivery 8…86 Invoice 9…92 Invoice 9…91

53. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.53 DS5: 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.

54. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.54 DS5: 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

55. SD6: Payment 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.

56. Sales Process January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.56 SD7: Handle Customer Return Customer Return Order received Goods Receipt Create Credit Memo Quality Inspection Payment to Customer Delivery Note

57. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.57 SD7: Handle Customer Return 1 2 3 Order 14Delivery 8…56 Return OrderReturn Delivery Invoice 9…68 PaymentCredit Memo Quality Inspection Return to Inventory

58. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.58 SD7: Handle Customer Return 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

59. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.59 SD7: 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)

60. PEN, Inc. EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2011 PEN, Inc. EGN 5620 Enterprise Systems Configuration (Professional MSEM) Fall, 2011 Sales & Distribution Processes

61. Enterprise Structure in Pen Inc. (review) Plant (P _ _ _) Client (700) Chart of Accounts (C _ _ _) Company Code (C _ _ _) Fiscal Year Variant (2011) Credit Control Area (C _ _ _) Shipping Point (S _ _ _) Sales Org. S _ _ _ Distribution Channel (RE, WH) Division (01) Sales Area (S _ _ _) Controlling Area (C _ _ _) SL10SL20

62. Sales Quotation

63. Sales Order

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

65. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.65 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).

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

67. Exercises: 158. Post goods issue 159. Bill customer 160. Post receipt of customer payment 161. Create a scheduling agreement 162. Process deliveries for a scheduling agreement 163. Display scheduling agreement 164. Check stock status 165. Bill customer 166. Run customer credit check 167. Post receipt of customer payment