Sales Order Management

in SAP R/3

The order to cash process

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 Sales Order Cycle

Sales Order Processing

Pre-Sales Activities Inventory Sourcing

Payment
Billing Delivery

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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/3
Organizational Elements
 Client
 Company Code
“An essential characteristic of the SAP R/3 standard
 Sales Organization business program is the strict adherence to a formal
structure of data. In no other way is it possible to build and
 Distribution Channel
maintain the very large system of databases and
transactional processing routines that a modern integrated
system demands.
 Sales Division
The structure of SAP R/3 is designed to be adaptable to the
 Sales Area structure of all common configurations of head office and
subsidiary operating units. The standard software is not
 Plant itself altered when it is implemented in a company: only
the tables of parameters that control it so as to make it fit
 Storage Location
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
 Shipping Point 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 Liabilities &
Assets
one company code Owners Equity
 United States
 Europe
 India
 China

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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
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.
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 Sales Division
Sales
Organization

Divisions
Product Product Product
Line 1 Line 2 Line 3

 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

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 Sales Area

Sales Organization 1 S a le s O rg a n iz a tio n 2

Distribution Channel 1 Distribution Channel 2 D is trib u tio n C h a n n e l 1

Division 1 Division 2 Division 1 D ivis io n 1 D ivis io n 2

 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.
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 Fitter Snacker Sales
Organization

Fitter Sales (##FS)

Wholesale (WH) Direct (DI)

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 009

Storage location 0001

Storage location 0002 Storage location 0003

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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

Sales Order Processing

Pre-Sales Activities Inventory Sourcing

Payment
Billing Delivery

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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

Pre-Sales Contact
Inquiry
Scheduling
Contract Quotation agreement

Materials Management
Sales Information System

Production Planning
Sales Order Order
Processing
Inventory Sourcing
Delivery/ Delivery Goods issue
Transportation Transfer Order Shipment

Billing Invoice

Payment/ Material Stock

Accounts Receivable
Accounting Account

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 Document Flow

Order Delivery Invoice Accounting

Document Flow of a Sales Order

Order 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

Customer Pricing
Master Master
Material
Master

 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
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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

Customer Master Sold-to party 2540-00

Item Material Quantity

Material Master 1 1400-500-00 30
2 1400-100-00 20

 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.

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 Shipping Point and Route
SP 1

SP 2

SP 3

Plant Shipping Point Route Customer

 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)
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 Stock Available: Backward Scheduling

Requested
Material Transportation Loading Goods Delivery
Order Date Availability DatePlanning Date Date issue date Date

Transit Time
Loading Time

Pick Pack and Stage The R/3 System uses the

longer of these two times in
calculating delivery scheduling.
Transportation
Lead Time

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 Stock Unavailable: Forward Scheduling

Confirmed
New Material Transportation Loading Goods Delivery
Order Date Availability DatePlanning Date Date issue date Date

Transit Time
Loading Time

Pick Pack and Stage The confirmed delivery date

is derived by the R/3 System
using forward scheduling based
Transportation on the new material availability date
Lead Time

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 Delivery
Complete
Sales Order Delivery
Delivery
Partial Delivery
Delivery
Sales Order Delivery
Delivery

Order Sales Order

Combination Delivery
Sales Order
 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.
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 Picking Process

D elivery

Tran s fer O rd er

P rin t Tran s fer O rd er

C on firm Tran s fer O rd er*

* not mandatory
D elivery Item s C om p lete P roc es s d ifferen c es

C op y p ic k ed q u an tity C reate a n ew tran s fer ord er

for varian c e q u an tity

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 Billing
Invoice Sales Order Delivery Invoice
Split
Invoice

Separate Sales Order Invoice

Delivery
Invoice
per delivery Delivery Invoice

Collective Sales Order Delivery

Invoice
Delivery Invoice
Sales Order Delivery
 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.
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 Posting Payments

Invoice 1
Acme Corp. 4325
Invoice 2
Pay to $
Dollars
Invoice 3
First National Bank
Invoice 4
2132 123123 54545 345 34

 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.
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 Fitter Snacker Exercise

West Hills
Athletic Club

Sales
Inquiry Order
Sales and
Distribution
1 2

Pricing Availability

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 Fitter Snacker Exercise
Pick Goods Issue
4 5
Materials
Management

Sales
Order Delivery Delivery Delivery

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 Fitter Snacker Exercise

Invoice
West Hills
Athletic Club

Sales and Delivery

Distribution
6
Accounts 7
Receivagle Post
Receivable Receivable
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