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

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/3 Organizational 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.
“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. Company Code United States Europe India China
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
Liabilities &
Owners Equity
Assets

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. Distribution Channel
Sales
Organization
Distribution Channel
Wholesale
Retail
Direct
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 Division Divisions are used to present product lines.
Organization
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 Area
Division 1
Division 2
Distribution Channel 1
Distribution Channel 2
Sales Organization 1
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 Snacker Sales Organization
Wholesale (WH)
Direct (DI)
Fitter Sales (##FS)
Snackbar (SB)

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

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

25. Document Flow
Order
Delivery
Invoice
Accounting
Document Flow of a Sales Order
Order 900
. Delivery
. . WMS transfer order
. . GD goods issue: delivery
. . Invoice
. . . Accounting document
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. Master Data Customer Master Material Pricing
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. Creating an Order
Sold-to party
Item Material Quantity
Customer Master
Material Master
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. Shipping Point and Route
Plant Shipping Point Route Customer
SP 1
SP 2
SP 3
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. Stock Available: Backward Scheduling
Requested
Delivery
Date
Goods
issue date
Loading
Transportation
Planning Date
Material
Availability Date
Order Date
Transit Time
Loading Time
Pick Pack and Stage
Lead Time
The R/3 System uses the
longer of these two times in
calculating delivery scheduling.

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

36. Delivery A delivery can be created for each sales order.
Complete
Partial
Order
Combination
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. Billing
Sales Order
Delivery
Invoice
Split
Separate
per delivery
Collective
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. Posting Payments
Invoice 1
Invoice 2
Invoice 3
Invoice 4
Acme Corp
Pay to $
Dollars
First National Bank
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 Hills Athletic Club
Fitter Snacker Exercise
West Hills Athletic Club
Sales
Order
Inquiry
Sales and
Distribution 1 2
Pricing
Availability

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

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