Step: 1

Maintain Purchase Organization

Path: Spro—Enterprise Structure—Definition—Materials Management—Maintain Purchasing
Organization.
Step: 2
Create Purchasing Group
Path: Spro—Materials Management—Purchasing—Create Purchasing Group.
Step: 3
Maintain Transportation Planning Point to Company Code.
Path: Spro—Enterprise Structure—Definition—Logistics Execution—Maintain Transportation
Planning Point
Step: 3A
Assign Transportation planning point to company code.
Step: 4
Assign Purchasing Organization to Company Code.
Path: Spro—Enterprise Structure—Assignment—Materials management—Assign Purchasing
Organization to Company Code.
Step: 5
Assign Purchasing Organization to Plant.
Path: Spro—Enterprise Structure—Assignment—Materials management-- Assign Purchasing
Organization to Plant
Step: 6
Create Vendor Account Group
Path: Img—Financial Accounting—Accounts Receivables and Accounts Payables—Customer
Accounts—Vendor Accounts—Master Data—Preparations for Creating Vendor Master Data--Define
Account Group
Step: 8
Create Vendor
T-Code: XK01
Step: 9
Define Modes of Transport
Path: Spro—Logistics Execution—Transportation—Basic Transportation Function---Routes—Define
Routes—Define Modes of Transport.
Step: 9A
Define Shipping Types
Path: Under the Same Menu path---Define Shipping Types
Select New Entries and Assign the Shipping Type (e.g. Road or Train) and Assign Mode of
Transport (Mdtr) and Assign Shipping type Procedure group.
Step: 9B
Define Transportation Connection Point
Path: Under the Same Menu path--- Define Transportation Connection Point.
Step: 9C
Define Routes and Stages.
Path: Under the Same Menu path--- Define Routes and Stages.
Select the New Entries and Enter the Details
Then Select the Routes stages and define
Step: 9D
Maintain Stages for all Routes.
Path: Under the Same Menu path---Maintain Stages for all Routes.
Step: 10
ROUTE DETERMINATION
Define Transportation Zone
Path: Spro—Logistics Execution—Transportation—Basic Transportation Function---Routes—Route
Determination—Define Transportation Zone.
Step: 10A
Maintain County and Transportation Zone for Shipping Point.
Path: Under the Same Menu path--- Maintain County and Transportation Zone for Shipping Point.
Select the Shipping point and enter the Country and Transportation Zone
Step: 10B
Define Transportation Groups.
Path: Under the Same Menu path---Define Transportation Groups
step: 10D
Maintain Route Determination
Path: Under the Same Menu path--Maintain Route Determination.
Select New Entries and Define the Route Determination.
SHIPMENTS
Path: Spro—Logistics Execution—Transportation—Basic Transportation Function—Shipments
Step: 11
Define Shipment Types
Path: Spro—Logistics Execution—Transportation—Basic Transportation Function—Shipments—
Define Shipment Types.
Select the New Entries and define Shipment Type
Step: 12
Go to Customer master data.
In Address of General data. Enter the Transportation Zone id. and save
Third-party process overview

In third-party process the delivery of the goods required by the customer is not done by sales organization
where customer orders. Instead, the request of the goods is forwarded to an external vendor who sends
the material directly to the customer.

Here is what happens in third-party process:

1. Customer orders goods and a sales order is created in a sales organization

2. Purchase requisition is created automatically when sales order is saved.
3. Purchase order is created at the vendor in the MM purchasing application (manually or
automatically)
4. If the vendor does the outbound delivery to the customer, the goods receipt can be posted in the
system
5. Invoice receipt is created (invoice from vendor)
6. Invoice to customer is created (order based invoice)

SALES ORDER

Third-party process is triggered when the sales order with third-party item is created. Depending on
settings done in customization third-party item categories can be automatically determined by the system
(automatic third-party processing) or they can be changed from standard item to third-party item category
in sales order (manual third-party processing).
Sales order type used for third-party – OR (standard order)
Item category for third-party – TAS
Schedule line category for third-party – CS
Let’s look deeper into the settings in the system done for automatic and standard third-party process:
ITEM CATEGORY TAS:
Create PO Automatic indicator is not marked in TAS. ALES is an item category for third-party processing
where this indicator is marked.

ITEM CATEGORY DETERMINATION

Item category TAS will be determined automatically for standard order (OR) and item category group
BANS (third-party item). Item category group can be found in material master, Sales: Sales org.2 view.

SCHEDULE LINE CATEGORY CS

Data: Order type = NB, Item Category = 5 and Acct.AssgntCat = X is the data for Purchase requisition. If
it is filled like above the purchasing requisition will be created automatically as standard purchasing
requisition (NB), with item category S and acc.assign cat X. The mapping of item category (from 5 to S)
can be found in IMG: MM->Purchasing->Define External Representation of item categories. The
definition of account assignment category can be found in IMG: MM->Purchasing->Account assignment-
>Maintain acc.***. Categories

SCHEDULE LINE CATEGORY DETERMINATION

THIRD-PARTY PURCHASE REQUISITION

After saving sales order with item category TAS the purchase requisition is automatically created. In order
to see the document go to: Environment -> Status overview and expand data for item, then expand data
for purchase requisition as well:

Double click on the requisition number and you will be taken to the purchase requisition document. The
other way is to go to schedule line where you can find the purchase requisition number.

If third-party item has more than one schedule line with confirmed quantity > 0, then purchase requisition
is created for each schedule line.

It is wise to have the vendor determined in source of supply at this stage of the process (i.e. source list)

MANUAL PURCHASE ORDER

The purchase requisition needs to be converted into purchase order in MM (t-code me21n). The purchase
order document type is NB (standard order), item category S, that must be assigned to account. Thus
account assignment category needs to be given. In this example it is X (automatically taken during
conversion from purchase requisition, as it was defined in item category CS).

The definition of acct assignment category can be found in IMG: MM->Purchasing->Account assignment-
>Maintain acc.***. categories:
Note: There is also a third-party account assignment category created in the system and its definition
looks as follows:

The mapping of item categories: IMG: MM->Purchasing->Define External Representation of item

categories:

AUTOMATIC PURCHASE ORDER

As it was written before – the purchase requisition is created automatically when sales order is saved. It is
possible to automatize the next step, the creation of purchase order, as well. The ALE function is used for
that purpose. The indicator for the automatic creation of purchase order is not set for TAS item category.
However, there is a special item category – ALES which can be used instead in third-party process. The
indicator for the automatic creation of purchase order is marked in ALES by default.
Prerequisites for the automatic creation of purchase order are as follows:

 The indicator automatic purchase order needs to be marked in item category definition (item
category ALES has it by default)
 Unique source of supply needs to exist for third-party item
 At least the document type for the purchase order must be assigned for Sales organization in
customizing under Enterprise structure->Definition->SD->Define, copy, delete, check sales
organization

If all above prerequisites are set up correctly, purchase order will be created when sales order is saved.
Then, it can be found in document flow in sales order.

GOODS RECEIPT

Since during third-party processing goods are moved directly from the vendor to the customer, inventory
management is not affected by this event. However, if sales department would like to document and enter
delivery to the customer in the system it is possible depending on settings in customization. If account
assignment category 1 is used in item category definition, goods receipt is not possible, as the goods
receipt indicator is not set for this account assignment cat. If account assignment category X is used,
goods receipt is possible.

The goods receipt posting (t-code migo) would have the following effects:

 The warehouse stock is not updated

 The goods receipt is posted directly to consumption and the consumption quantity is updated
 The order value is posted to a GR/IR clearing account for invoice verification purposes
 The goods receipt can be traced in the purchase order history

The goods receipt posting should happen when the vendor reports that outbound delivery was executed
or customer confirms that delivery arrives.

Since no flow of goods occurs in the enterprise, the goods receipt posting results in updates on value
basis.
INVOICE RECEIPT

The invoice verification with reference to purchase order needs to be created when invoice from vendor
arrives to enterprise (t-code miro). The value and, if goods receipt was done earlier, the quantity are
proposed by the system. When the incoming invoice is posted following are updated:

 Purchase order history

 G/L accounts
 The vendor account in subledger accounting, as well as the liabilities account (general ledger)

CUSTOMER BILLING DOCUMENT

Once invoice receipt has been entered, the customer can be billed as well (t-code vf01). Since an
outbound delivery doesn’t exist for the third-party the invoicing will be order based. In the item category
TAS definition, the billing relevance indicator is set to F by default. That means: relevant for order-related
billing document: status according to invoice receipt quantity. That is, the system allows invoicing the
order only when vendor’s invoice has been processed in invoice verification.

The customer invoice is created for the quantity specified in the vendor invoice. The setting in the copy
control for the third-party item category from sales document to billing document specifies that the
quantity from the invoice receipt is transferred to the billing document instead of the order quantity (billing
quantity indicator in copy control is F)

THIRD-PARTY SALES
Introduction
In third-party sales the company transfers the sales order to an external vendor. This vendor delivers the goods directly to
the customer and invoices the company. The customer receives an invoice from the company’s sales office.

Some of Prerequisite configuration

1. Create Purchasing organization
Path: SPRO - Enterprise Structure- Definition-Materials Management- Maintain Purchasing Org.

2. Create purchasing group

Path: Materials Management - Purchasing - Create purchasing group

3. Assign Purchasing Org. to company code*

Path: SPRO - Enterprise structure - Assignment - Materials management - Assign purchasing organization to company
code.

4. Assign purchasing organization to plant

Path: SPRO - Enterprise structure - Assignment - Materials management - Assign purchasing organization to plant
5. Maintain purchasing area
Path: SPRO - Materials Management - Purchasing - Maintain Purchasing Area

6. Maintain Purchasing Area Determination*

Path: SPRO - Materials Management - Purchasing - Purchasing Area Determination

7. Create Vendor Account Group

Path: SPRO - Financial Accounting - Accounts Receivables and Accounts Payables - Customer Accounts - Vendor
Accounts - Master Data - Preparations for Creating Vendor Master Data - Define Account Group

8. Number range assignement to Vendor Account Group

Path: SPRO - Financial Accounting - Accounts Receivables and Accounts Payables - Customer Accounts - Vendor
Accounts - Master Data - Preparations for Creating Vendor Master Data - Assign Number Rangers to Vendor Group

9. Some other critical factors involved

Refer the following:
Key Factors in Configuartion for Third-party Sales

Some Prerequisite master data preparation

1. Create Third-Party related Material Master
TCode: MM01

Maintain:

Industry Sector: Retail

Material Type: Trading goods (KMAT)

Views to maintain in material

In Basic data 1:

Maintain BANS in Gen/Item cat group

In sales: Sales org. 2:

Maintain BANS In item category Group

In Sales: General/Plant:

Maintain KP in Availability check

 In Purchasing:

Enter the purchasing group.

Click on the Autom. P0

2. Create Vendor Master Data for Third-Party Sales

TCode: XK01
provide the details like Company code, Purch. Org., & Account Group
and start creating Vendor.

3. Create Vendor Info Record (if required)

TCode: ME11
Enter the Vendor no. Material no., Purchasing org. and Plant and Create Info Record.

Process flow

Step: 1 Create Sales Order

Use TCode: VA01
Enter the

 Sold to Party,
 Ship to party
 Customer PO no. &
 Matl. No. (Third party material)
 Ordered Qty.
A screen with the following details will get created.
Then click on the continue button
Pick the Schedule lines.
A screen will be displayed with Delivery date, Rounded qty. and Confirmed qty.
Note: Before saving the sales doc. Purchase requisition no. will not get created
Save the Sales Order.
On saving the sales order, purchase requisition is generate in the back ground.

To know the purchase requisition number, either go schedule line tab in item level of the sales order and check in
procurement tab or go sales order in status overview.

Step: 2 Check Purchase Requisition (PR)

Use TCode : ME53N

Step: 3 Adopt Purchase Requisition into Purchase Order or create PO with reference to
PR
Use TCode: ME21N
Keep the standard order (Which you have defined in the Document type)
Enter the purch. Org.
Purch. Group. and Company code
Enter the Purchase Requisition no.
After Entering the Details, Press Enter Button
A screen as appears with all the details like Matl. Po. Qty, Deliv. Date, Net price Curr etc.
Then Save the PO.
Hence PO is created

Step: 3 Release the PO. Number. (Based on release stategy in PO type used)
TCode: ME29N
Now Release the Order.
On release it will give following message
"Purchase Order no. xxxxxxxxx changed"

Step: 4 Post Invoice Receipt

Use TCode: MIRO
This done once you receive the vendor's invoice.
Basic Data Tab (Header Level) - Enter Invoice Date, Reference No, Amount (tax inclusive) and Tax amount.
PO Reference Tab (Item Level) - Enter the purchase order number
Check at the header, if the balance is zero and the green indicator is on. If yes, check the line items which have to be posted
else correct the amount and/or tax amount to make the balance zero.
Save the invoice receipt document

Step: 5 Generate invoice for Third-party sales order

Use TCode VF01
This to create the billing document which will be send to the customer as request for payment.
Provide sales document number and press enter.
System will take you to billing overview screen.
Save the document to create billing doc.
Release the billing Doc to accounts, if required.

Inter-company billing process

In normal business, we may decide to source our selling products from group companies to
cover excess demand, or to optimally use excess capacities of group plants. When we source
our selling product from a plant of another company within the group, we can use inter-
company billing and generate required documents for both selling company and supplying
company.

We assign plant of other company code to designated sales area (distribution channel for inter-
company sales) of our company code, and we can use standard SAP inter-company pricing for
the same. Here we can specify any special prices applicable via condition types IV01 & IV02.
There are condition types PI01/02 which serve as reference condition types for IV01/02.

IV01 & IV02 are used with subtotal 9 (gross value) and routine 22 (inter-company billing) as
shown below.

Now, we will look at two company codes 1002 & 3000. Go to IMG–>Sales & Distribution –>
Billing –> Intercompany Billing

First, we define order types for inter-company billing. Specify IV (standard billing document
type) in required sales document type inVOV8.

or IMG–>Sales & Distribution –> Billing –> Intercompany Billing –> Define order types for inter-
company billing
Here, I have assigned 2010 plant (company code 3000) to sales area 3031/71/00(company code
3000) for internal costing.

I have created a customer id (XD01) in 1002 and assigned the same to the sales organization of
1002. This customer id will be payer & represent 1002 for inter-company billing of plant. IMG–
>Sales & Distribution –> Billing –> IntercompanyBilling –> Define internal customer number by
sales org

Customer places an order on company code 1002. 1002 decides to deliver from plant 2010
belonging to company code (3000). I have created normal sales order and saved. Inventory
postings for the delivery are in plant 2010 & company code 3000. Further, two billing
documents are generated with reference to the same delivery document. Document flow is as
under:
First billing document created in company code 1002 and payer is customer.

Create second invoice with reference to the same delivery document number. This second
invoice is the inter-company billing document created in company code 3000 and here payer is
the first company (1002 here) for sales area 3031/71/00. Price (IV01) will be active for inter-co
bill where as PR00 will be active for customer bill.

Related accounting documents & excise documents can be generated as per pricing procedure
with reference to respective billing documents.