Sales Order Process

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Sales Order Management in SAP R/3

Adapted by Nik Dalal, OSU from material created by Bret Wagner, WMU

And SAP America Plug-and-Play grant

The order to cash process

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Sales Order Cycle

Pre-Sales ActivitiesSales Order Processing

DeliveryBilling

Inventory Sourcing

Payment

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SAP R/3 SD module

SD: Sales and Distribution Integrated with:

Materials Management (MM) Production Planning and Execution (PP) Financial Accounting (FI)

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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

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SAP R/3Organizational 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.

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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

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Company Code

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 EquityAssets

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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.

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Distribution Channel

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.

SalesOrganization

Distribution Channel

Wholesale Retail Direct

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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

DivisionsProduct Line 1

Product Line 2

ProductLine 3

SalesOrganization

Sales Division

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Sales Area

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.

Division 1 Division 2

Distribution Channel 1

Division 1

Distribution Channel 2

Sales Organization 1

D ivis ion 1 D ivis ion 2

D is trib u tion C h an n e l 1

S a les O rg an iza tion 2

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Fitter Snacker Sales Organization

Wholesale (WH) Direct (DI)

Fitter Sales (##FS)

Snackbar (SB)Snackbar (SB)

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Plant

A physical or logical site where value is added A plant can be a

Production facility Warehouse Distribution vehicle

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Storage Location

A subdivision of a plant where inventory is managed.

Storage location 0001

Storage location 0002 Storage location 0003

Storage Location 009

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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.

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Customer Order Cycle

Pre-Sales ActivitiesSales Order Processing

DeliveryBilling

Inventory Sourcing

Payment

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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.

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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

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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.

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Inventory Sourcing

Inventory sourcing occurs when: An order is created. An order is changed. When the delivery document is created.

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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)

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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.

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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.

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Order Management Process

Quotation

Contact

Schedulingagreement

Order

Delivery Goods issue

Shipment

Invoice

Accounts Receivable Material StockAccount

InquiryContract

Pre-SalesPre-Sales

Sales OrderProcessingSales OrderProcessing

Delivery/TransportationDelivery/Transportation Transfer Order

BillingBilling

Payment/AccountingPayment/Accounting

Materials M

anagement

Materials M

anagement

Production PlanningProduction Planning

Inventory SourcingInventory Sourcing

Sales Information System

Sales Information System

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Document Flow

Order Delivery Invoice Accounting

Document Flow of a Sales OrderOrder 900. Delivery 50000672. . WMS transfer order 100000828. . GD goods issue: delivery 40000184. . Invoice 90000376. . . Accounting document 100000269

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.

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Document Flow

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Master Data

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

CustomerMaster

CustomerMaster

MaterialMaster

MaterialMaster

PricingMasterPricingMaster

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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

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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

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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

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Pricing

Pricing is carried out automatically based on predefined prices, discounts, and surcharges

Highly customizable within SAP R/3

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Creating an Order

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.

Sold-to party 2540-00

Item Material Quantity 1 1400-500-00 30 2 1400-100-00 20

Customer Master

Material Master

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Shipping Point and Route

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)

Plant Shipping Point Route Customer

SP 1

SP 2

SP 3

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Stock Available: Backward Scheduling

RequestedDelivery

DateGoods

issue dateLoading

DateTransportationPlanning Date

MaterialAvailability DateOrder Date

Transit TimeLoading Time

Pick Pack and Stage

TransportationLead Time

The R/3 System uses thelonger of these two times in

calculating delivery scheduling.

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Stock Unavailable: Forward Scheduling

ConfirmedDelivery

DateGoods

issue dateLoading

DateTransportationPlanning Date

New MaterialAvailability DateOrder Date

Transit TimeLoading Time

Pick Pack and Stage

TransportationLead Time

The confirmed delivery dateis derived by the R/3 System

using forward scheduling basedon the new material availability date

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Delivery

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.

Sales Order Delivery

DeliverySales OrderSales Order

Sales Order

Delivery

DeliveryDelivery

CompleteDelivery

PartialDelivery

OrderCombination

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Picking Process

D elive ry Item s C om p le te

C op y p icked q u an tity C rea te a n ew tran s fe r o rd e rfo r va rian ce q u an tity

P rocess d iffe ren ces

C on firm Tran s fe r O rd er*

P rin t Tran s fe r O rd er

Tran s fe r O rd e r

D e live ry

* not mandatory

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Billing

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.

Sales Order Delivery InvoiceInvoice

Sales Order DeliveryDelivery

InvoiceInvoice

Delivery

Sales Order

Sales OrderDeliveryDelivery

Invoice

InvoiceSplit

SeparateInvoiceper delivery

CollectiveInvoice

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Posting Payments

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.

Invoice 1Invoice 2

Invoice 3

Invoice 4

Acme Corp. 4325

Pay to $ Dollars

First National Bank 2132 123123 54545 345 34

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Fitter Snacker Exercise

Inquiry

West HillsAthletic Club

SalesOrder

1 2

AvailabilityPricing

Sales andDistribution

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Fitter Snacker Exercise

DeliverySalesOrder

3

5Pick

MaterialsManagement

Goods Issue

Delivery

4

Delivery

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Fitter Snacker Exercise

InvoiceWest Hills

Athletic Club

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Sales andDistribution

AccountsReceivagle

Delivery

Receivable

PostReceivable