Sales & Distribution Processes EGN 5620 Enterprise Systems Configuration Spring, 2013

1. Sales & Distribution Processes EGN 5620 Enterprise Systems ConfigurationSpring, 2013

2. 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 Sales & Distribution Process © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

3. Sales & Distribution ProcessSAP Implementation EGN 5620 Enterprise Systems Configuration

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

5. 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.

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

7. Integration SAP Sales Order Process(Order-to-Cash) Check Availability Sales Process Sales Order Entry Sales Quotation Entry Delivery Note & 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.

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

9. A sales order contains all of the information needed to process customers request. • The steps for creating a sales order: • 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

10. 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. SD3-1: Pricing

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

12. 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 engages in trading 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.

13. 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)

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

15. Availability are affected by inward & outward movements 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.

16. 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.

17. 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.

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

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

20. 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.

21. The following 5 deadlines are of importance for delivery scheduling: • 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. SD3-4: Delivery Scheduling © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

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

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

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

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

26. 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 SD3-5: Shipping Point and Route Determination © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

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

28. SD3-6: Transfer of requirements to MRP

29. Predefined trade areas — NAFTA, EU • Automated reporting for trade areas • Automated controls • License management • Embargo lists • Control by customer, country, product, point in time SD3-7: Foreign Trade and License Processing © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

30. 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

31. 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.

32. 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 DS3: Create sales order: item proposal © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

33. Picking Packing Loading Post Goods Issue 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 Each step in the delivery process updates the delivery note status Delivery Note © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

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

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

36. 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 DS5: Billing Overview © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.

37. Sales Invoice Sold To: Rushmore Group Sales Org: S001 Dist Channel: RE Division: 01 Conditions/Price: $120 DS5: Billing © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

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

39. Billing document is the umbrella term for invoices, credit memos, debit memos, etc. • 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. DS5: Billing Documents © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

40. 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 DS5: Billing Plans © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

41. 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. SD6: Payment

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

43. 1 Order 14 Delivery 8…56 Invoice 9…68 2 Return Order Return Delivery Quality Inspection Return to Inventory 3 Credit Memo Payment SD7: Handle Customer Return © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.

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

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

46. Sales & Distribution Processes PEN, Inc. EGN 5620 Enterprise Systems Configuration

47. Sales Quotation

48. Sales Order

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

50. 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). Document Flow © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved.