Chapter 1 - Understanding the Sales

Order

Administering SAP R/3: The SD-Sales and Distribution Moduleby ASAP World
Consultancy

Chapter 1: Understanding the Sales Order

Using Master Data in Sales Orders
A sales order is a business transaction that includes a promise to supply some
goods or services in exchange for an agreed amount of money. This contract is
represented in the SAP R/3 system by a data structure that includes fields to which
the detailed information may be assigned. This structure is also referred to as a
sales order.

A great deal of information can be attached to a printed sales order, and likewise, many
other data structures can be linked to the SAP R/3 sales order in the database. You can
regard the sales order as an instrument for controlling and accounting for the business
transaction that it represents. This chapter reminds you of how these ideas have been
represented in the Sales and Distribution application.

The persons or companies who have bought from you in the past or are accorded
the status of prospective customer are each represented by a master record. The
customer master record stores the following types of data:

• General data about the customer and the contact person

• Sales-specific data about pricing, deliveries, and output documents

• Company code data, which includes banking and posting details or payment data
for that part of the customer corporation that is trading with you

If a customer is unlikely to deal with you more than once, you do not need to create
a full master record. Such a transaction can be recorded on a one-time customer
record or a CpD (Contra Pro Diverse) customer record.

Representing Account Groups

Your customer’s company might have a complex organizational structure that
prevents you from entering a simple sold-to party record for the requirement. The
customer master record can be used to represent any of these account groups:

• Sold-to party

• Ship-to party
• Bill-to party

• Payer

Each of the account groups can be assigned a specific selection from the available
transaction data. Their documents will then be automatically tailor-made for them by
the system. The SD-Sales and Distribution module is provided with definitions and
models for the common types of customer relationships. You can also define your
own account groups and specify which elements of transaction data are to be
included in documents assigned to these groups.

Establishing a Contact Person

All the information you need to carry out sales support is held in the contact person
records that are part of the customer master.

Building Carrier and Supplier Master Records

A business partner who is also a carrier and supplier would have a master record
maintained in the MM-Materials Management module, as well as in the FI-Financial
Accounting module. If the supplier is also a customer from time to time, you can
enter its supplier number in its customer record in the SD-Sales and Distribution
system, which will automatically create a link. That link ensures that the two records
always share exactly the same data in all the fields they have in common.

Using the Additional Data Function

You can predefine additional data in customer master records. You can invoke an
Additional Data Screen at either the header or the item level in a sales document.

Additional data for the header is composed of five fields named Customer Group 1–
5. The items can have additional data named Material Pricing Group 1–5.

These additional data fields do not alter functionality in standard R/3, although you
can supply default entries for them in customer master records and in material
master records for header and item fields, respectively. If this additional data is
available in inquiries or quotations, it will be transferred to sales orders and then
copied into delivery and billing documents.

The following sequence gives access to the master records for the purpose of
maintaining additional customer data:

1. Select a sales area screen such as Sales or Shipping.

2. Select Environment>Additional Data.

3. Use the Additional Customer Data (Sales and Distribution) dialog box to edit the
data.

Note Additional data can be different for each sales area assigned to the
customer. The appropriate default data for the sales area will be proposed
in the sales documents.

When you have a sales document on your screen, you can enter additional data by
using either of the following sequences:
 • Select Header>Additional Data.

• Select Item>Additional Data.

Identifying a Person on the HR-Human Resources

Records
If you create a personnel record, for one of your customer sales representatives for
instance, the master will be managed by the HR-Human Resources module. You will
therefore be able to refer to a member of your staff by entering his or her personnel
master record number. This will make available to you any other details about the
person you are authorized to see.
Using Material Masters for Products and Services
The SAP R/3 system is quite happy to manage products and services as if they were
all materials. If you are in the recruiting business, for instance, you can even
maintain material masters for the people you are interviewing and employing.

The material master is a standard master record that can store all the information
necessary for the management of a material and its stocks. The material master also
holds data on how the material is used, purchased, and stored, and how it is to be
managed in the sales and distribution processes.

The important point is that every time a material is identified in a sales document (or
in any other SAP document for that matter), the system will automatically consult the
material master. Although they may need different selections of data, processing any
of the following sales-related documents will entail consulting one or more material
masters:

• Inquiry

• Quotation

• Sales order

• Shipping document

• Delivery note

• Billing document

• Rebate agreement

Creating a Material Master Record

The material management section is normally responsible for creating new material
masters. The section has two basic procedures:

• Create a new master either by copying and editing a reference document or by

entering all the data directly.

• Add new information to an existing material master record.

The following sequence is used to add a view to an existing material master record
classified under trading goods:
1. Select Logistics>Sales/Distribution>Master Data.

2. Select Products>Material>Trading Goods>Create.

3. Enter the material’s number.

Note You will be able to access only the screens that have been assigned to SD
for maintenance according to the material type that has been assigned to
the material during customizing.

A message will report that the industry sector has automatically been transferred
from the master record. You accept this by pressing Enter and you will be offered a
dialog box from which you can select the views you intend to maintain. This choice
of views will define a screen sequence that will be recapitulated whenever your ID is
associated with the process.

If you accept again, you will be invited to specify the organizational level at which
you want to carry out the change. What you have to do is enter a combination of
plant, sales organization, and distribution channel that is accepted as valid by the
system. You can then step through the sequence, editing the data screens to suit.

Changing a Material Master Record You cannot change a material master unless
the view you are interested in already exists. The following procedure for trading
goods works for all material types:

1. Select Logistics>Sales/Distribution>Master Data.

2. Select Products>Material>Trading Goods>Change.

3. Enter the number of the material you want to change.

4. Select the Sales 1 view from the dialog box if, for example, you want to alter the
base unit of measure for this material.

5. You must define the organizational level you intend the change to operate from
as a valid combination of plant, sales organization, and distribution channel.

6. Enter the new data when you reach the relevant screen; save it. A successful
save will be confirmed.

Although you can view changes by displaying all the screen views in turn, it is often
more convenient to explicitly ask for a display of the changes in the material you are
interested in. After establishing the material and the view you require, you can select
Environment>Display Changes. You see a list of all the change documents that have
been created for this material, with the user, time, and date the changes took effect.
If you want to see what sort of change took place, select Actions>Choose to focus
on a particular item in the list.

Deleting a Material Master Record If your company ceases to offer a material as a

product or service, the material master has to be marked for deletion. This will
effectively block sales order entry or delivery processing.

You have to select Change>Material>Set Deletion Flag>Immediately.

At the screen titled Flag Material for Deletion: Initial Screen (1), you mark the
material number and signify the organizational level at which you want the change to
take effect.
A deletion flag cannot be canceled. However, a material master is not actually
deleted until archiving takes place, and then only if no business transactions are still
open that depend on it.

If you do not want to delete a material, you can block it. For example, it may have
technical defects that you expect to be only temporary. Your company may want to
discontinue the product for the time being. You can set various types of blocks that
prevent sales processing or allow it only with warning messages on all the
documents. A block is an example of a master record change.

Defining Defaults for a Material Master Record If you are in a Sales department,
you may want to use the same views of the material masters all the time. What you
can do is set up your organizational level data as defaults that are applied to a
material master whenever your user ID is recognized. Every user can have a
different set of defaults.

The following sequence is suitable:

1. Select Logistics>Sales/Distribution>Master Data.

2. Select Products>Material>Trading Goods>Change.

3. Select Defaults from the menu bar.

4. Select Views and mark the views you want to work with.

5. Mark the field to signify that you want to view only the selections you have made.

These choices are now associated with your user ID when you access material
masters, and you will see only the views you have defined.

You can wipe out your default setting by unchecking the View Selection Only field.

Understanding Automatic Material Determination

The idea behind material determination is to provide a mechanism that will rapidly
communicate to all sales representatives. When any of them nominates a material,
the system will automatically substitute a better choice if one exists. A typical
example might be a consumer goods item that has become available in promotional
packaging as part of a sales campaign. The substitution may well have a time limit
so that the system reverts to the original material after the campaign.

Another automatic material determination function can be to substitute one material

number for another under such circumstances as the following:

• An obsolete product has been replaced by an improved equivalent.

• An order arrives with customer product numbers that have to be replaced with your
own material numbers.

• The customer may specify materials using the International Article Numbers
(EANs), which you prefer to replace with your own material numbers.

The system is able to make substitutions in material determination because it can

refer to a set of records that specifies which materials are to be substituted, the
replacement material in each case, and the time period or other logical condition that
determines when substitution shall be allowed.
Using Product Selection Some products may be available in alternative packaging
arrangements. Your customer may prefer one to another. The packaging
arrangement may be seasonal or include coupons from a sales promotion.

You can configure the product selection to be manual or automatic. For instance, you
can allow your order entry screens to offer a selection of alternative products so that
the order entry representative matches the option to the customer’s preference.

Automatic product selection will have the system make the choice on the basis of
availability and a system of priorities that you have specified in advance. The
priorities system is in the form of condition records that refer to the product’s
attributes.

Restricting Sales Order Items by Material Listing and Exclusion You can build a
shopping list for an individual customer and have it enforced so that no order will be
accepted unless the items all appear on the material listing. If there are only a few
materials you are not prepared to sell to a particular customer, you can assemble a
customer exclusion list of materials.

Material listing or exclusion can be applied to either or both of the following business
partner functions:

• Sold-to party

• Payer

The standard logic applied when the sold-to party is not the payer is to check only
the material listing of the sold-to party, if there is one. If not, the payer is checked for
a listing. The payer is not checked first because the sold-to party listing may include
some rarely ordered or exceptional items that do not appear in the payer listing. If
neither has a listing, the customer may order any material.

Creating a Material Listing or Exclusion Master Record The following sequence

sets up a material listing:

1. Select Logistics>Sales/Distribution>Master Data.

2. Select Products>Listing/Exclusion>Create.

3. Enter a value in either the List/excl.type field of A001 for material listing or in
B001 for material exclusion.

4. Select Key Combination>Customer/Material.

5. Enter a customer number.

6. Enter a validity period.

7. Enter the material numbers to be listed or excluded.

If you are lucky, your supervisor will have prepared such details in advance and you
will not need to enter them each time they are needed.

Accepting Product Proposals

In order to facilitate order entry, frequently occurring material combinations and
common delivery quantities can be predefined as product proposals. An item can be
proposed by referring to a product proposal, which you can locate using a
matchcode. Items provided by a product proposal can be changed in the sales order.

You can define a product proposal composed of the items a customer usually orders.
Any order being entered for this customer will then be displayed with this product
proposal as a suggestion. A bill of material can be incorporated in a product proposal
to specify a configurable material item, provided you do not need to configure the
BoM (Bill of Materials).

The following sequence will create a product proposal:

1. Select Logistics>Sales/Distribution>Master Data.

2. Select Products>Product Proposals>Create.

3. Edit the data screen.

Note You have to supply data to the Product Proposal Type, Sales
Organization, Distribution Channel, and Division fields in the Edit Data
screen.

4. Optionally, supply an entry for the Search Term field, which you can later use as
a matchcode to retrieve the product proposal.

You complete the product proposal by entering the materials and the quantities. If
you are using a bill of material, the details will be identified and copied to the sales
document when the proposal transfers there. You need to enter an item category
that has been configured in Customizing in the Structure Scope field to allow BoM
explosion.

When you save it, the product proposal will be assigned a product proposal number.

Listing Product Proposals by Material

You may need to examine all product proposals that include a particular material.
The following sequence will list them:

1. Select Logistics>Sales/Distribution>Master Data.

2. Select Products>Product Proposals>Display.

3. Enter the number of the material in which you are interested.

You will get a list of product proposals that include the material. You can ask for a
display of the product proposal.

Contributing to the Materials Database

The products and services represented and managed by the MM-Materials
Management system can also be created and referred to from the SD-Sales and
Distribution module. For example, a sales representative might acquire information
about a new supplier of a material that is already represented by a materials master
record. The details can be posted to the MM-Materials Management system, where
they will be verified and incorporated into the database. If a prospective customer
inquires about a material that he has not previously purchased from your company,
the details available in the material masters can be used to provide accurate, up-to-
date information. If there is no relevant material master, the MM-Materials
Management system will record this inquiry and alert the material controller. The
material masters are provided with a range of data fields that may be of interest to
the SD functions.

A material type is created during customizing for each of the main product types your
company trades in. When a material master is created for a particular product, it is
identified as an example of one of these types and is therefore assigned an
appropriate material master data structure. This will ensure that the data fields that
are irrelevant to a specific type of material will be suppressed when the record is
displayed on the screen.

The sectors of industry that you find in your business and that should be given
deferential treatment in one or more aspects of SD-Sales and Distribution can be
defined during customizing. You can then make sure that products for each sector of
industry are assigned the corresponding type of master data structures, which will
allow the system to maintain particular information and use it to be responsive to the
needs of that sector. For example, the difference between one industry sector and
another may be in the matter of distribution lot size, or in the way billing takes place.
In this instance, you may decide that some of your products will be sold and
packaged in two or more different ways: single units for the retail industry sector, and
pallets for the wholesale industry sector. Each sector will have a different cost and
billing procedure.

There are four attributes that serve to format the material master data into clusters:

• General data

• Data specific to a particular sales area

• Plant-specific data

• Storage location and inventory management data

The SAP term for a cluster of associated data elements is an attribute. These
attributes combine to form a data structure.

Any characteristic of a material that is always going to be the same is stored in the
general data attribute and will be made available every time the material takes part
in a transaction. For example, a specific type of steel will have a unique material
number and a particular description or specification.

The units of measurement may be a function of the manufacture method, such as a

roll of spring steel, or they may be decided on the basis of the most economical unit
for procuring this material, such as a pallet.

The following are examples of data that may be stored as general data because it is
invariant across all sources and uses of this material:

• Material number

• Description

• Units of measure

• Weight

• Volume
• Material division

Each sales area may be supplied from a particular warehouse or manufacturing

plant. Even though the material number is the same, the division of the supply
between delivery plants will entail a relevant record on the material master. If, for
example, the same material can be obtained from another sales area if necessary,
the material master records should show this, even though each sales area normally
uses a separate source.

The following are examples of data that may be specific to each sales area:

• Delivering plant

• Sales text

• Units of measure

• Product hierarchy information

• Shipping data

Whether the supplying plant is a warehouse or a manufacturing unit, the costs of

storing a material there and the Material Requirements Planning procedures will
need to be known in order to plan, cost, and schedule a sales order. This information
also finds its place in the appropriate attribute of the materials master, from which it
can be accessed by the SD-Sales and Distribution module.

MRP profile, production costs, and export data are examples of data that may be
specific to each plant.

A warehouse may have storage locations that are designed for particular materials. If
a material has to be stored in such a location, this information is stored in the
material master records.

The following examples illustrate the material data that may have to be kept in the
storage location and inventory management attribute:

• Temperature conditions

• No other material to be stored in the location reserved for this material

• Storage conditions, such as dust and humidity control; special handling facilities
essential

Relationships to the particular sales organizations and distribution channels may

affect some or all of the entries. Any particulars that have been determined by the
master records of a superior level in the organizational structure will be inherited by
a data object in a lower level, unless the record at the lower level carries specific
instructions to the contrary. For example, a material that has to be stored in a cooled
warehouse will show this requirement in its material master data record. If a
particular method of packaging has been determined for a whole class of materials,
any material belonging to this class will be packed in this way unless the individual
material master record carries contrary instructions.

Working with a Bill of Materials

When a product is made up of several components, the details are documented in a
BoM. If additional information is required about any of these components, a BoM
explosion may be used to call in the extra documentation. If several products differ
by only a few components, the technique of BoM variants may be employed.

Interpreting Material Status

You can adopt the standard status indicators of the MM-Materials Management
system or define indicators of your own to serve the purpose of exercising control
over sales activities. For example, you may want to block the taking of orders for a
batch of defective material but permit inquiries about the product in anticipation that
a future batch will not be defective.

A discontinued product can be the subject of status control so that future orders will
be blocked even though the product is still being shipped to satisfy existing orders.

Making Stock and Inventory Inquiries

Flexible display facilities permit you to assess the various plant stocks and
summarize them in the form of overviews. Special stocks can be identified for
different treatments. Special stock destined for only one customer would be an
example.

Maintaining Customer Material Info Records

If a customer needs special sales and delivery requirements that would not be met
by the information stored in the customer master or the relevant material masters,
you can set up a customer material info record; this record takes precedence over
the rules established elsewhere. The info record contains the following kinds of
information:

• Customer, sales organization, and distribution channel

• Your material number and description

• The customer’s material number and description

• Shipping data

• Partial delivery arrangements

The system will use the customer material info record to prepare a sales proposal
ready to be placed in the sales order if you approve it.

The SD-Sales and Distribution module will operate material determination and
material substitution procedures if they have been established. For example, you
can define a set of criteria to select a suitable material automatically. You may also
have set up the criteria for a material to be substituted automatically in orders for a
particular customer. The material listing and material exclusion rules are valid for a
certain period of time and serve the purpose of restricting the choice of options
presented by the system when preparing a sales proposal.

Understanding the Condition Technique

The SAP R/3 condition technique gets its name from the discipline of formal logic
and, in particular, from the conditional proposition form that can be expressed as
follows:
 If {a certain set of conditions are all, in fact, true}
Then {certain actions can be taken}.

The logical if...then condition technique is used extensively in the SAP R/3
system to enable the computer to carry out specified actions automatically if — and
only if — the proper conditions have been satisfied by the necessary data.

The choice of price information and the imposition of discounts or surcharges are
matters that vary from business to business. You can use any data in a document as
the condition or trigger for the application of your pricing structure.

Price lists can be standard, based on the material used, customer-specific, and so
on. Discounts or surcharges can be allocated by customer, material, price group,
material group, and any combination of such criteria.

Each condition master record has a specified time validity and can be constrained so
as to permit or forbid manual changes during this period.

Conditions can also be used to define the circumstances when the system may be
allowed to handle sales taxes as surcharges. The standard SD-Sales and
Distribution system is provided with sales tax formulas for most parts of the world,
and you can add your own.
Linking Sales and Accounting
The functionality of the SD-SLS Sales component of the SD-Sales and Distribution
system concentrates on the processing of sales transaction data in the wide variety
of modes and contexts characteristic of the sales and distribution sector of business.
There are many varieties of sales orders and many uses to which the resulting
documents can be put.

The variety of business transactions in the Sales and Distribution departments is

discussed in this book’s Introduction. The intention here is to concentrate on some of
the unique, functional enhancements provided by the SAP R/3 system.

Documenting Sales from Inquiries and Quotations

One of the links between Sales and Accounting that often appeals to the potential
customer is demonstrated when your company seems to know everything that has
gone on previously in relation to a product or service. The inquiry or quotation will be
handled by the system as the beginning of a sales order into which it will be
converted if a sale is forthcoming. The quotation will carry a date marking the end of
its validity period, which you can use to monitor inquiries and quotations and to
determine the order in which they should receive your attention.

You will have identified the material required by the inquirer, perhaps by its material
number, or perhaps because you have used a previous quotation or order for this
customer. You can also enter the material in text form, which the system will interpret
using the SAP R/3 Classification System, and then find a material number to
consider entering at a later date yourself or have the system enter automatically.

There may be several alternative materials that could possibly interest the customer.
You can quote for these as well as for the material requested. If the customer places
an order, the system will work on the material the customer chose from your
quotation.

Using the Functionality of the SD-SLS Sales Component

The philosophy behind the functionality of the SD-SLS Sales component is to
minimize the work you have to do to complete an order. The standard approach is to
find what is required and propose it to the user for adjustment and confirmation.

If you simply enter a list of items, the system will try to find those items in a previous
order for this customer. If there are none, it will look for the items in the master
records and offer you the default values it finds there. For instance, it will suggest
business partners to deliver the material if that has happened before; it will propose
that you use the lot size and packaging customary for this material.

Much of the information will be in material and customer master records, the
following data in particular:

• Pricing

• Tax determination

• Weight and volume determination

• Delivery scheduling

• Payment methods

The system will offer textual materials to be included in the sales order if this is
customary, and it will have detailed proposals for creating the commercial papers.

Should you have to save a sales document before it has been fully serviced with
appropriate and valid information, the system will accord it the status of an
incomplete document and remind you with a list of the missing items.

When you return to the work, the system can show you all the incomplete
documents in your task list and the list of defects for each.

Recognizing Outline Agreements

Contracts and scheduling agreements are two types of outline agreements you
make with a customer to supply goods and services over a specified period of time.

A contract is an outline agreement to supply goods and services in the future, but the
delivery date and shipping arrangements are not specified until the customer
requests delivery of the goods in the contract. At this time, a release order is issued
and processed the same way a sales order is. The quantities and general data of
each release order are noted in the contract, and the quantities remaining to be
delivered are updated there accordingly.

The quantities and dates are specified from the beginning in a scheduling
agreement, which is otherwise processed much like a series of contracts, using the
dates and quantities specified in the outline schedule.

Updating Backorders
If you call for a list of backorders, you will see the order items that could not be
confirmed because something was unavailable. The availability will be checked
again automatically, and you will see the current situation. If some of the orders can
now be satisfied, you can use the update function to have the sales orders confirmed
directly.
Understanding the Tasks of the Accounting and
Controlling Modules
The SD module forwards billing data from invoices, credit memos, and debit memos
to the Financial Accounting-Accounts Receivable (FI-AR) and Controlling (CO)
application modules.

The system will automatically generate the necessary accounting documents that
are used by the following accounting and controlling components:

• General Ledger

• Profit Center Accounting

• Profitability Analysis

• Cost Accounting

• Accounting

Various actions take place automatically:

• The system posts offsetting entries to the appropriate accounts, defined by

account assignment codes.

• Reference numbers are added to ensure that the FI system will associate all billing
documents that belong to the same transaction. For instance, a credit memo will
be given the same reference number as the invoice to which it pertains.

• The requirements of the CO-Controlling module have to be met by assigning costs

and revenues to the appropriate subledgers.

If you are working in the SD module, you may be authorized to display all accounting
documents associated with a particular billing document and block billing documents
for Accounting, if necessary.

Assigning Costs and Revenue to Different Accounts

A code set is provided to enable you or the system to direct the posting of costs and
revenue to the correct selection of the following accounts:

• Customer Accounts Receivable

• General Ledger, such as a cash clearing account

• Revenue

• Sales Deduction

• Accruals for rebate agreements

• Accrual Account

• Accrual Clearing Account

Setting Up a Business Area
A business area can be defined in geographical terms or in terms of particular
products. This is another link between Sales and Accounting. During the
Customizing for Sales procedure, business areas can be defined to correspond to
sales areas or to plants within divisions if the accounts are managed on a product
basis.

The system will then post costs and revenues to the accounts assigned for the
business area.

Forwarding Billing Data to the Controlling Subledgers

To continue the theme of linking Sales and Accounting, any number of the following
subledgers may be set up to receive postings of costs and revenues so as to give
meaningful summaries of the value flows:

• Profit Center

• Cost Center

• Extended General Ledger

• Projects

• Make-to-Order Sales Orders

• Plant Maintenance Orders

• Profitability Analysis

• Cost Collector

Note If your system has profitability analysis installed and configured for make-
to-order sales orders and projects, the costs will not be assigned to
profitability analysis until the make-to-order sales order or project is
settled.

See Chapter 4, “Billing,” for information on assigning costs for a plant maintenance
order according to a resource-related billing document.

Taking Advantage of Account Assignment Links

If your system is to post entries in the billing documents automatically to the relevant
accounts, it must be able to refer to a source of information that indicates which
accounts to target. There are several possible sources:

• Chart of accounts of the company code

• Sales organization

• Customer’s account assignment group

Note Find the customer’s account assignment group in the customer master
record. It’s in the Billing screen’s Account Group field.
• Material’s account assignment group

Note Find the material’s account assignment group in the material master
record; it’s in the Sales 2 screen’s Account Assignment Group field.

• Account key copied from the pricing procedure

The method used is defined in logical terms by the condition technique, in which
condition records are consulted to make the account assignments. The account
assignment process has to determine the revenue accounts to which prices are
posted and the sales deduction accounts to which surcharges and discounts are
posted.

It is an automatic process in the standard version of the SAP R/3 system for an
offsetting entry to be made to the customer account for all billing types. If you should
want the offsetting entry to be made to a G/L account (such as a cash clearing
account), your system administrator must define an extra billing type that contains
the cash clearing key EVV.

Locating Errors in Account Assignment

One of the account assignment analysis function’s tasks is to find out where errors
have occurred in account assignment if the system is unable to forward the billing
data to Accounting. The general reasons for this type of error are as follows:

• The account assignment group in the payer’s customer master record is absent or
wrong.

Note Check the CustAcctAssgnmtGroup field in the Header Billing Data section
of the payer’s customer master record.

• The account assignment group in the material master record of an item on a billing
document is absent or wrong.

Note Check the MatAcctAssignGroup field in the Header Pricing and Taxes
sections of the material master record.

• The account assignment has not been set up correctly in Customizing.

You can release the billing document once you have manually entered a correct
account assignment code.

Linking the Reference Number and Allocation Number

You can find an incoming payment document by searching for its reference number,
which may be, for example, the customer’s purchase order number or a transaction
number.

There may have been cancellations or credit memos created that the FI system
needs to associate with the relevant invoice. Two numbers in the billing document
header can be passed to the accounting document:

• The reference number in the accounting document header.

• The allocation number in the customer line item. The account line items are sorted
and displayed according to the allocation number.
Either of these numbers is accepted in business correspondence.

You can specify how reference numbers shall be allocated at the stage of
Customizing for Sales. The following codes are used:

• A — Customer’s purchase order number

• B — Sales order number

• C — Delivery number

• D — External delivery number

• E — Invoice’s billing document number

• F — External delivery number if available; the delivery number if not available

(used mainly in the component supply industry)

If you have to manually enter a reference number or allocation number in a sales

order, the following sequence is appropriate:

1. Select Header>Business Data.

2. Edit>Billing Details>Field>Reference.

Your system may have been customized to enter a reference number automatically
in a billing document or to copy it from the sales order. You can examine the
automatic data as follows:

Select Header>Details>Field>Allocat.no.

Hopefully, your system will be working perfectly all the time and you will not have to go
into any troubleshooting procedure.
Operating on Sales Orders
In the case of a simple sales order with several items, you can probably complete
the entry in a single screen. As you do so, your system will automatically propose
relevant data taken from the master records, as follows:

• From the customer master record of the sold-to party, the system will extract sales,
shipping, pricing, and billing data. If there is any customer-specific master data
concerning relevant texts, partners, and contact people at the customer site, this
too will be copied.

• Each material mentioned in the sales order will be automatically identified with
specific material master records, which carry information on pricing, delivery
scheduling, availability checking, tax determination, and the procedure for
determining the weight and volume of the delivery.

The information gathered automatically by the system is used merely to construct a

proposal — you can amend or supplement it. You can decide to modify the value of
discounts within a permitted range, or perhaps you are authorized to modify the
terms of payment or delivery arrangements.

One of the easiest ways to create a new sales order is by referring to an existing
document. Your customer may identify a quotation you sent previously, so you can
allow the system to copy all the details.
Benefiting from Standard Functions During Sales Order
Processing
When your sales order is submitted for processing, the standard SAP R/3 will
automatically carry out the basic functions. These functions can be customized to
include the following:

• Pricing

• Availability checking if this is defined in the material master record

• Transmitting item details to Material Requirements Planning (MRP)

• Delivery scheduling

• Shipping point and route determination

• Credit-limit checking

There are also special sales order types, of which the rush order and the cash sales
order are examples.

Creating a Sales Order

The following procedure will generate a sales order:

1. Select Logistics>Sales/Distribution>Sales.

2. Select Sales Order>Create.

3. Enter the order type.

You may also enter the organizational data, although values for sales organization
(as well as sales office and sales group) and values for the distribution channel and
division are usually suggested from user-defined parameters.

You must also enter, or select from a list offered by the system, the following data:

• Customer number of the sold-to party

• Customer’s purchase order number

• Material numbers

• Order quantities for the materials

Your sales area may include several predefined unloading points or several ship-to
parties in the sold-to party’s customer master record. In these circumstances the
system will offer you the options in a dialog box. The same technique is applied to
alternative payers and bill-to parties if they are possibilities.

As you build up the sales order items, you will be shown the material data so that
you can check that you have specified correctly. If an availability check reveals
insufficient stock for the intended delivery date, you will be automatically shown a
screen of substitute delivery proposals.

You can add further information to the header by selecting from the menu. To add
data to individual items, you should mark the items before signifying your choice in
the menu.

To specify a packing proposal in the sales order, you should select Edit>Packing
Proposal.

Linking to a Reference The following sequence links to a reference: Create Sales

Order>Sales Document>Create w/Reference>To Quotation. This will copy both the
item data and the header data from the quotation into the sales order.

Note The header data will not be copied unless you leave the Sold-to Party field
blank.

A dialog box will offer you the following choices when creating a sales order with
reference to another document:

• Copy all items into the new document.

• Copy only some of the items into the new document.

If your system supervisor has authorized partial selection, you can select Selection
List and then individually deselect the items not to be copied. You can change the
quantities of the items as necessary before they are copied. The system will not
allow you to copy from incomplete sales documents. However, you can copy from
more than one complete document into a single new document.

If your supervisor has allowed partial document copying, you can make copies into
more than one new document.

Creating a Rebate in Kind Item If you agree to deliver some goods free of charge,
the system will account for this as a rebate in kind and handle it as a discount. You
can make this rebate a main item or enter it as a sub-item. If the material has the
item category group NORM, a standard sales order will assume that a sub-item is a
rebate in kind.

1. In the Sales Order screen, select Overview>Double-Line Entry.

2. Enter the material number of the rebate in kind as a new line item directly under
the higher-level item.

3. Enter the item number of the higher-level item in the HgLvIt field of the second
entry line. Doing so makes it a rebate in kind subordinate to the line item directly
above.

You might be challenged by some dialog boxes when you attempt to create a rebate
in kind. For example, the system may have difficulties if your customer master record
for the sold-to party includes definitions of several ship-to parties or unloading points.
Availability may be a problem, in which case you will be offered some alternative
delivery proposals.

If you satisfy the system’s needs for information, the double-line overview screen will
be shown in which the rebate in kind item has been given the item category TANN.

It may happen that you decide to award a discount in the form of a rebate in kind
after the sales order has been completed. However, if you subsequently call up
Sales Document>Change, you will be able to insert a new item to represent the
rebate in kind if you assign it an item number that will cause it to be placed below the
item to which it is to be subordinate. If you alter the quantity of a main item, a
subordinate rebate in kind item will be automatically changed in proportion unless
you deliberately forestall this by the following sequence:

1. In the overview screen, mark the rebate in kind item.

2. Select Item>Structure>Components.

3. Mark the Fix indicator next to the UoM field.

Thereafter, changes to the quantity of the main item will not bring about any changes
in the rebate in kind item.

Once you have generated a rebate in kind item as a subordinate that has been
accepted by the system and therefore assigned as item type TAN, you can change
this indicator to TANN to elevate it to a main item.

Creating a Sales Order with Service Items The process of entering services is
similar to the procedure for generating a rebate in kind item. Services are defined in
the material master records with item category group DIEN and item category TAX. If
you want the service to be a sub-item, you must call the double-line entry screen and
identify a higher-order item to which it is to be subordinate. Like rebate in kind items,
changes in a main item are normally matched by proportionate changes in the
subordinate item representing the associated service. You can stop this adjustment
by using the Fix field.

Changing a Sales Order

You may want to change a few individual items or a large number of items. There is
a fast change function for this occasion.

The following procedure is used for individual item changes:

1. Select Logistics>Sales/Distribution>Sales.

2. Select Sales Order>Change.

Note If you merely want to inspect a sales order, select Sales Order>Display,
rather than Sales Order>Change.

You may have to locate the relevant sales order. The system will try to be helpful by
assuming that you are going to want to change the order you were previously
working on in the current session. You can overwrite this and enter a particular sales
order number, the number of the relevant purchase order, or even the number of the
delivery.

Blocking a Sales Order A sales order block can stop the shipping function or the
billing function. If you place a block for shipping, the system will not allow anyone to
create a delivery based on this sales order. If you block a sales order for billing, you
will not be able to bill any of the individual items in it. If you are operating the
collective processing of billing documents, a billing block on a sales order will
prevent any delivery being included in the billing due list.

It is also possible to block particular sales document types for individual customers.
You could block sales order creation for a specific customer, for example.
The scope of a delivery block will be controlled by where it is placed. A block in the
header will apply to all items. A block in an item will be limited to that item. A block in
an item’s schedule line will apply only to that schedule line.

The procedure for setting a header delivery block is as follows:

1. Select Header>Business Data.

2. Locate the Shipping section.

3. Mark the Deliver Block field.

Item delivery blocks are set through the fast change function.

If you mark a schedule line that you want to block for delivery on the Schedule Line
screen of the item, you can then select Edit and mark the Delivery Block field in the
Shipping details.

You can always block an item for delivery at the schedule line level, but your
Customizing table TVLSP will control whether you are able to place a block at
header level in the business data, where it will stop shipping across the whole sales
order. There has to be an explicit assignment of blocking to each delivery type for it
to be allowed at the header level.

Deleting a Sales Order Whether you can delete a sales order item or the entire
order depends on how far processing has gotten. The status indicates this progress
and reveals whether any subsequent documents, such as deliveries, have been
posted.

Deleting an order is a change and follows this sequence:

1. Select Logistics>Sales/Distribution>Sales.

2. Select Sales Order>Change.

3. Accept the sales order proposed or identify the sales order you want to delete.

4. Select Sales Document>Delete>Confirm the Deletion.

If you only want to delete an item or two, mark the items and select Edit>Delete
Item>Confirm the Deletion. You would, of course, save the sales order from which
you deleted an item.

Rejecting Items in a Sales Order Rejecting an item in a sales order means that it
will not be subsequently copied to any other sales document. The following
sequence is effective:

1. Select Logistics>Sales/Distribution>Sales.

2. Select Sales Order>Change.

3. Enter or select the document number for the Sales Order field.

or

Select Edit>Select Items>Select All.

4. Select Edit>Fast Change Of>Reason for Rejection.

5. Enter a predefined value in the Reason for Rejection field.

6. Select Copy>Save.

You can also use fast change having selected several items for rejection, perhaps
assigning a different reason to each.

Handling Special Sales Orders

Cash sales and rush orders are examples of special sales orders.

A cash sales transaction is defined as a situation where the customer picks up and
pays for the goods when the sales order is placed. The system automatically
proposes the current date as the date for delivery and billing; then, when the sales
order is posted, the system automatically creates a delivery. The system will print out
a cash sale invoice as soon as the sales order is confirmed.

By this time the customer may already have the goods, in which case picking is
irrelevant. If the customer is going to pick up the goods from a warehouse, the
delivery may be needed as proof that a purchase has been made and as a guide to
the warehouse for picking.

If the goods from a cash sale are to be sent later, the delivery document will be
processed via the warehouse in the usual way, except that payment has already
been made.

The main difference between a cash sale and a rush order is that although the
customer picks up the goods (or you deliver them) the same day as the order is
placed, the invoice is created later.

Processing Orders with Standard Functions

When you enter a sales order, the system can automatically carry out basic
functions, such as the following:

• Pricing

• Availability check (if this function is specified in the material master records)

• Transferring requirements to Material Requirements Planning (MRP)

• Delivery scheduling

• Shipping point and route determination

• Credit-limit check

These tasks are carried out with the help of functions selected from standard SAP R/3
programs customized to suit your particular implementation. A strict regime of data
structure definition is imposed so that the SAP R/3 system may be applicable to most
types of business data processing arrangements. If you follow this scheme, your
system will accept your entries and process them efficiently and without error. If you do
not structure your data according to the defined arrangements, often you will not be
 allowed to enter it. If you do succeed in entering incorrect data, the result will not be
interpreted along the SAP standard lines.
Setting Up Your Sales and Distribution Organization
One of the most important data structures SAP R/3 uses is the hierarchical structure
that defines the relationships between the departments and levels of management
responsibility in your company. This structure is adopted in any application module
that is integrated with your R/3 basis. For example, the SD module adopts the basic
organizational structure and extends it so that all the entities of importance to the
business of sales and distribution in your company are represented by a unique
master record in the database.

The SD module’s purpose is to support the tasks of selling and sending products to
business partners. The module will also support performing services for them.
Therefore, the system has to have access to data about the products and services
and about the business partners who purchase them.

Your company’s Accounting and Materials Management departments also need

access to this master data. The material master data is stored in a specific way so
that all those who need to use it may do so efficiently.

When you are conducting a sale, the SAP R/3 system will become aware of what
you are doing only when you successfully enter a business transaction. For
example, you will not be able to promise to dispatch a material item that is not on the
list of materials. Therefore, your intended transaction will not be accepted until you
enter or choose from a list one or more of the materials or services recorded in your
database.

Of course there are many more details associated with a business transaction —
quantities and destination, for instance. All this essential information is recorded in
the system as a transaction document when all possible checks have been carried
out; this ensures that you are not entering information that cannot be successfully
processed.

Business is made as easy as possible. If you have identified one of your regular
customers, you system will probably have suggested the address for delivery. It may
even be suggesting the sales items most likely to be required for this customer,
based on his purchasing history. The account to which the sale should be posted will
also be suggested if the customer is recognized.

In all this transaction work, the system is trying to make data entry as easy and as
error free as possible. For instance, your system will have been customized so that
your product’s quantities will be accepted only in certain units of measure. You enter
the number of units, but the system will offer you only those units of measure that
have been assigned to the product or service you are dealing with.

If you have to send a message to a colleague or to the customer, there will probably
be a set of standard phrases that your company has authorized and from which you
can make a simple choice. The system will fill in the details and offer the result for
your inspection and approval. Should you find that you cannot achieve the result you
intend with the standard messages, there will usually be an arrangement for you to
append a free text message. However, if your messages need to be translated into
another language, you will be encouraged to use the standard message elements for
which the translations have already been entered as standards.

The SAP R/3 system is efficient and reliable because it uses these predefined data
structures.

Setting Up Master Data for Sales and Distribution

The master data needed by an integrated sales, distribution, and accounting system
can be extensive and elaborate in its structures. However, SAP R/3 uses a logical
arrangement of entity types. These types identify the purpose of an item of
information by associating it with at least one other entity that is part of a structure’s
hierarchy. At the top of the hierarchy is the grouping of R/3 services that is defined in
systems terms as the instance because all the necessary components are started
and stopped at the same time. A central R/3 unit is defined by an instance profile,
which nominates all the components that are to be active together. When the
instance is functioning, it will recognize a code that stands for the very top level of
responsibility in organizational terms. In SAP R/3 terminology, this is referred to as
the client level. There may be one or more affiliated companies, subordinate to the
company at the client level, represented by company codes.

The client company may have a number of departments or sections that carry out
duties such as the following:

• Sales

• Sales support

• Shipping

• Billing

• Data warehousing

Each of these departments can be defined as a separate entity so that its costs and
revenues can be attributed to these functions separately. All these departments will
have to post their data to a central accounting facility at least once each financial
year. If you are using SAP R/3, this posting will probably take place either daily or in
real time as soon as you complete a transaction entry.

Recognizing the Purpose of Master Data

In a SAP system, information that is needed in several places or at different times is
entered only once. It resides in master records, where it may be kept up-to-date.

Each master data record has a unique number, and you can arrange to confine
certain ranges of these numbers to specific sales areas.

The Sales department will make use of this master information in its business
transactions. Here are some of the ways the Sales department will use the master
data record:

• General details about business partners

• Information specific to particular customers

• Materials, including services, objects, and assemblies

• Text about materials and sales conditions

• Prices from collected cost data, standard calculations, direct entries, and planning
processes

• Surcharges and discounts

• Taxes applied according to local rules

• New product proposals to be offered during the sales process

It is clearly important to have accurate information available. It is fundamental to the

design of all SAP systems that a database of master records is held and maintained
under strict conditions that ensure that any user who uses this information can be
informed of the date it was entered or last amended, as well as the identification of
the person responsible for the change. It is also a principle of design that any
automatic function that is operating in support of the user will also use the master
records. For example, if a sales representative is compiling an order for a customer,
that customer’s address will be accessed from the master record. The master will be
changed — not a local record held by the person who was first informed of the
change — if the customer changes his address.

Such a strict system of data maintenance can succeed only if it is also flexible in the
ways in which the stored information can be presented to the user and applied to the
business processes. The next few sections illustrate the range of options open to the
user in relation to the master data records.

Changing Master Data Records in SD

You can copy master records and change them via a variety of standard functions,
but the system will record and time stamp every change.

In order to find a master record speedily, you can use any part of any data field as a
matchcode.

Appreciating Organizational Structures

SAP R/3’s general organizational units relevant to SD-Sales and Distribution are
taken from the SAP R/3 Enterprise Data Model (EDM):

• Client is the highest level in SAP R/3. The transaction data of one client may not
be accessed from another client. There is often a training client and a testing client,
in addition to the client code that represents your group or corporate identity and
under which the SAP system runs normal business. Some data is managed at the
client level because everyone in the corporate group of companies will want to
refer to exactly the same information and be certain that it is up to date and
correct. Vendor addresses are an example of data managed at the client level.

• Company Code signifies a legal unit under the client level that produces its own
financial documents, balance sheet, and profit and loss statement, and may well
maintain them as continuously reconciled.

• Plant can be a production facility or a group of storage locations where stocks are
kept. This term is also used in the context of “transportation plant” in the SD-Sales
and Distribution system. The vehicle is treated as a temporary storage location.
Planning and inventory management take place at the level of the plant, and it is
the focus of materials management. It can supply its material stocks to more than
one sales organization.

• Sales Organization has a legal connotation in that it represents the unit

responsible for selling, and is therefore responsible for product liability and rights of
legal recourse. All business transactions in SD-Sales and Distribution have to be
processed financially within a sales organization. A sales organization can draw its
materials from more than one plant.

• Distribution Channel defines how different materials reach the customer. Examples
 of distribution channels include wholesale trade, retail trade, industrial customers,
and direct sales from the plant. A customer can be supplied through several
distribution channels within a sales organization. Each sales organization may
maintain its own material masters. By this means, it might hold different data for
these materials from other sales organizations and perhaps separate sets for
different distribution channels. Thus, prices, minimum order quantity, minimum
quantity to be delivered, and delivering plant can differ for each sales organization
and distribution channel.

• Sales Division is a subdivision of a distribution channel. The division may have

been assigned only some of the total product range, and there may be customer-
specific agreements for each division on such matters as partial deliveries, pricing,
and terms of payment. You can carry out statistical analyses or set up separate
marketing within a division. You can define a division-specific sales organization
and freely nominate the products that form product groups, each handled by a
separate division.

• Sales Area defines a combination of not more than one division, distribution
channel, and sales organization. Thus, if there are two divisions using the same
distribution channel, each division will belong to a different sales area. An
individual customer can be assigned to more than one sales area if there are
differing requirements and agreements to be considered. Prices, minimum order,
and delivery quantities are the sort of factors that may have to be recognized by
creating unique sales areas for them, always in the SAP R/3 structural context of a
sales organization, and perhaps a sales division and distribution channel as well.

• Sales Office is a method of representing the internal organization. It is a division

under the client level.

• Sales Group is a further internal subdivision of the people in a particular sales

office.

• Salesperson is the subject of a unique personnel master record.

• Shipping Point is a location within a plant where deliveries are processed. Each
delivery is assigned to and processed by one — and only one — shipping point.
The shipping point is also an independent organizational entity responsible for
scheduling and processing deliveries to customers, as well as to your own
warehouses. The shipping point can be specialized with respect to delivering plant,
type of shipping vehicle or method, and the loading equipment required.

• Loading Point is a part of a shipping point that is able to offer a capacity to handle
deliveries. There may be several similar loading points, and there may be different
equipment at some loading points that makes them more suitable for particular
types of deliveries — forklift trucks for pallets, for example.

The flexibility of the SAP R/3 system to represent complex and company-specific
shipping structures depends on the combination of the various types of
organizational units.

Some companies prefer to structure their SAP R/3 system from an accounting point
of view; they focus on the various ledgers. Other companies concentrate on the
variety and complexity of the products they handle and see their central function as
materials management. Still others focus on sales and distribution. Of course, all
companies will, from time to time, concentrate on each of these aspects. The SAP
R/3 system implementers will seek to build a structure from the standard
components that can represent all these points of view.

Defining Business Partners A business partner is any person or organization

 involved in some way with a business transaction in SD-Sales and Distribution. For
example, the customer, your sales representative, the carrier — each of these can be
represented by business partner functions in the system. A separate master record is
maintained for each business partner.

Defining Customers The SAP R/3 organizational structure refers to customers and
prospective customers as customers. A vendor is a business partner who carries out
a delivery or a service for your company.

A business partner can be a customer and a vendor. If that is the case, you must
maintain both a customer master record and a vendor master record for this
business partner. You can associate the master records by entering the vendor
number in the customer master record and the customer number in the vendor
master record.

Documenting Your Sales Personnel A numbered personnel master record stores

data on each employee in your company. This master record resides in the HR-Human
Resources module and access to it is strictly controlled by the Personnel department. If
your company does not have the HR application installed, you can create a personnel
master record in the SD application.
Serving Customers and Business Partners
If your company has business contacts, it will create and maintain a customer
master record that contains all the data necessary for processing the business
transactions. The accounting department shares the customer master records with
the SD departments.

Each customer master record comprises separate data areas for the following
purposes:

• General data about your customer company that might be needed by anyone is
stored in a shared area and is identified only by customer number. Maintaining the
data can be done using both the master data’s accounting view and the sales and
distribution view.

• Data that is applicable to only one of the company code level members of your
enterprise is stored in a separate area for each company code and is identified by
customer number and company code.

• Data needed only for sales and distribution purposes is stored in a separate area
for each sales organization and is identified by customer number, company code,
and sales organization code.

Creating a Customer Master Record from the Center

The Accounting department is usually in the center of an organization. It may be a
prudent policy for this authority to be responsible for creating customer master
records that can then be used by affiliated company codes. In particular, customer
master records can be created centrally for the payer and the sold-to party, who may
also be the payer on some occasions.

There are two similar procedures, as follows:

1. Select Logistics>Sales/Distribution>Master Data.

2. Select Business Partners>Payer>Create>Create Centrally.

 or

Select Business Partners>Sold-To Party>Create>Create Centrally.

The account group for the payer or sold-to party will be proposed automatically, and
you will have to enter the rest of the data. When you enter this data you get access
to all the customer master record’s SD and Accounting screens. You will have
function key links to some of them, and certain fields may have to be provided with
special data input.

Creating a Customer Master Record for One-Time

Customers
If your sales desk handles many customers who are unlikely to make additional
purchases at a later date, it is probably not worthwhile to generate a separate
customer master record for each of them. This is where the customer master record
for a one-time customer is used. All one-time customers are added to the same
master.

The following sequence will set this up:

1. Select Logistics>Sales/Distribution>Master Data.

2. Select Business Partners>One-Time Customers>Create.

3. You have to declare your position in the sales structure by sales organization,
distribution channel, and division.

The system will automatically propose CpD as the account group for a one-time
account and then assign an internal number for each one-time customer. You accept
this by pressing Enter.

The Address screen that you see composes only those fields that can be identical for
all one-time customers — they will all be stored on the single master. You should
enter a generic title that you want to use for all one-time customers on the master’s
In the Name field. You might use a geographical region, or you could lump them
together on the basis of their inquiries’ sources.

After a successful creation of a one-time customer master, you will get a message of
the following form:

Account <customer number>

Created for SlsOrg. <sales organization>
DistCh <distribution channel>
Div. <division>

After you have created suitable one-time customer masters for the various ways in
which you want to group them, the system will identify a new customer that can be
added. As you are creating a sales order for a customer whose data fits, you will be
automatically shown a new customer number and invited to complete the Address
screen, as well as add other relevant information according to the one-time customer
master’s format.

Using a Reference for Customer Master Record Creation

Entering an existing customer number in the Customer field is a quick way to create
a customer master record. You might choose as a model a customer you expect to
 have similar characteristics. The system will copy general data into a new customer
master record.

If you also enter data that identifies a sales area, the sales and distribution data that
can be shared will also be copied. Country, language, and account group will be
copied by default. Unique data, such as the address and unloading points, is not
copied. You can change any data that has been copied from a model or reference
customer master.

Your customer may already be the subject of a customer master record in another
sales area. The general data will therefore not need to be entered again.

Grouping Master Data

Grouping master data records is a means of allowing them to be used elsewhere.
Customer master records, material master records, and price master records can all be
created and edited in one sales organization and assigned groups for use in other
distribution channels or divisions. These sharing arrangements are set in Customizing.
Understanding Customer Hierarchies
Many of your customers may work in hierarchies that are at least as complex as your
own. They may have a structured buying organization, for example, or a complex set
of outlets to which you may have to assign deliveries.

In spite of this complexity, a customer may rightly expect to enjoy price rebates on
the basis of the combined purchases — and the billing structure may be no less
complex.

Manipulating Customer Hierarchies

You must expect a customer hierarchy to evolve and change. SAP R/3 handles this
scenario by maintaining representations of customers in the form of hierarchical
structures in which the nodal elements can be moved and changed.

If you reassign a node in a customer hierarchy, the system will automatically

reassign any elements subordinate to this node. If you assign a new customer to a
node, all the pricing agreements and other arrangements will be inherited by default
from the parent node. If the object you are assigning is itself a hierarchy, all the
subordinate elements will also inherit characteristics from the new point of
attachment.

By this use of hierarchical objects, the master record system can keep track of any
changes in your customers’ structures. If they reorganize assets that are potential
customers already in your database, your records will be automatically changed to
record the newly inherited properties. If a customer acquires a new company with
whom you have already done business, your customer master structure can be
updated and this will update all the subordinate records.

Assigning Customer Hierarchy Types

If you have a number of customers that are structured in a particular way, you can
define a new hierarchy type in Customizing for Sales. The standard default is
hierarchy type A.

You can associate each hierarchy type with a particular business purpose and allow
only certain account groups to be used in that hierarchy type. You may also have
reason to permit only certain types of organizational data to be associated with a
specific hierarchy type.
A customer delivery location is typically located at the lowest node of a hierarchy.
Above this level may come a customer master record representing a regional office
with its own purchasing capability. Above this may come a head office level, again
with a customer master record because it can place orders with you. At a still higher
level you may have a customer master record to represent the global enterprise that
associates all your complex customer’s affiliated companies.

The concept of “hierarchy path” refers to the chain of responsibility that links one
node in a hierarchy to another at a different level. These paths are used to aggregate
quantities and values when calculating customer rebates, for instance.

Hierarchies are designed to represent complicated entities that are prone to

modification and rearrangement. You can rapidly reform clusters of nodes and your
system will do its best to fill in all the changed details for you — but there can be
anomalies. One level of a customer hierarchy may be enjoying a different rebate
validity period from another with which it has become merged. Such inconsistencies
are detected and reported as errors, which you can interpret by asking for Edit>Error
Analysis when the problem node is highlighted in the error message.