Relationship Between Schedule Lines and Delivery Items
Order ID:89JHGSJE83839 Style:APA/MLA/Harvard/Chicago Pages:5-10 Instructions:
Relationship Between Schedule Lines and Delivery Items
156 CHAPTER 5 The Fulfillment Process
Figure 5-31 displays an order with two items. Item 1 in the sales order has two schedule lines, and item 2 has one. The delivery document includes one schedule line for item 1 and one schedule line for item 2. Note that a delivery can include schedule lines from different orders. We discuss the requirements for combining items from multiple deliveries in the next section.
Figure 5-31: Relationship between schedule lines and delivery items
In our example, a separate delivery is created for each date. The delivery for May 10, which is re-created in Figure 5-30, shows two line items, one for 30 bikes and the other for 100 t-shirts. Note that the materials are shipped on May 5 so that they reach Colorado Springs by the desired data of May 10. Thus, the items in this delivery are associated with schedule lines from two items in one sales order. This principle is illustrated in Figure 5-31. The other delivery will include only one item—10 bikes—to be delivered by June 10.
Tasks
As identifi ed earlier, the specifi c tasks completed during the shipping step are (1) creating a delivery document, (2) picking, (3) packing, and (4) post goods issue. Creating a delivery document serves as an authorization for delivery. As Figure 5-32 illustrates, schedule lines from multiple sales orders with similar characteristics can be combined into one shipment or delivery. Specifi cally, the
Figure 5-32: Relationship between sales orders and deliveries
CH005.indd 156CH005.indd 156 31/01/11 6:39 AM31/01/11 6:39 AM
Process 157
sales orders must have the same ship-to address, shipping point, and due date. Conversely, items in one order can be split into more than one shipment.
The picking step is optional and is part of the warehouse management pro- cess. We will discuss warehouse management in Chapter 7. However, although picking is a part of the warehouse management process, it is triggered dur- ing the shipping step when a delivery document is created. The delivery docu- ment serves as a request for picking. The delivery document is converted into a transfer order in warehouse management, and the transfer order is then used to complete the physical movement of the materials needed for the shipment.
Items from multiple delivery documents can be included in a single transfer order, as illustrated in the left side of Figure 5-33. This approach can optimize the work of the pickers in the warehouse by grouping requests for materials that are located in the same area. Alternatively, a deliv- ery document can generate multiple transfer orders, as illustrated in the right side of the fi gure. Data from the delivery documents are copied to the transfer order, as illustrated in Figure 5-34. The delivery quantity from the
Figure 5-33: Relationship between delivery documents and transfer order
Figure 5-34: Delivery quantity vs. pick quantity
CH005.indd 157CH005.indd 157 31/01/11 6:39 AM31/01/11 6:39 AM
158 CHAPTER 5 The Fulfi llment Process
delivery document becomes the pick quantity, which is the quantity needed to be picked from storage. Once the picking is completed, the quantity picked is automatically transferred back into the delivery document.
After picking has been completed, the materials are placed in a staging area where they are packed appropriately. Materials are packed using a vari- ety of shipping units such as cartons, pallets, and containers. Each shipping unit can be packed into another shipping unit to consolidate the shipment. Typically, GBI ships each bike in an individual box and consolidates 20 boxes into one carton. It then packs several cartons into a pallet. Pallets are usually too heavy to lift by hand, so the workers must use a pallet jack or a forklift to load them into a shipping container.
Packing is diagrammed in Figure 5-35, which illustrates a delivery con- sisting of four items or materials. Item 1 is packed into one carton, items 2 and 3 are combined and packed into one carton, and item 4 has to be split and placed into two cartons. Two cartons are subsequently loaded onto one pallet, and the other two cartons onto a second pallet. Finally, both pallets are placed in a single container.
Figure 5-35: Packing options
The fi nal task in shipping is to post goods issue in the ERP system. The goods issue indicates that the shipment has left the facility. It also results in several outcomes, which we discuss in the next section.
Outcomes
The shipping step, which ends with the goods issue, has numerous outcomes (see Figure 5-36). These outcomes fall into three broad categories: (1) account- ing impacts, (2) creation of documents to record transaction data, and (3) updates to master data and previously created documents.
Shipping is the fi rst step in the fulfi llment process that has an impact on fi nancials. Specifi cally, the inventory accounts of the materials shipped are
CH005.indd 158CH005.indd 158 31/01/11 6:39 AM31/01/11 6:39 AM
Process 159
credited, and the cost of goods sold account is debited. These amounts are based on the cost of making or buying the materials. In the case of trading goods, the amount is based on the moving average price of the material, which we discussed in Chapter 4. In the case of fi nished goods, the amount is based on the standard price which takes into account production costs such as mate- rial, labor, and overhead. An FI document is created to record these data. Figure 5-37 illustrates these outcomes for the GBI example after the goods issue for the fi rst delivery has been posted.
As the fi gure indicates, the cost of each bike is $1,400, and the cost of each shirt is $15. Therefore, the inventory accounts for bikes and t-shirts are credited by $42,000 ($1,400 � 30) and $1,500 ($15 � 100), respectively, and the cost of goods sold account is debited by the sum of the two, $43,500. A similar impact will be recorded after the goods issue is posted for the second delivery in June. Note that the other accounts listed Figure 5-37 are relevant in later steps in the process. In addition, a controlling document may be created if a management accounting (controlling) relevant activity, such as profi tability analysis is in use.
Figure 5-36: Outcomes of shipping (goods issue)
Figure 5-37: FI impact of the shipping step
CH005.indd 159CH005.indd 159 31/01/11 6:39 AM31/01/11 6:39 AM
160 CHAPTER 5 The Fulfi llment Process
Shipping involves a movement of materials that reduces the quantity of those materials in inventory. Therefore, in addition to the reduction of inven- tory value in the general ledger, the inventory quantity is also reduced in the material master for the delivering plant. A material document is created to record this movement.
Relevant sales documents, such as quotations and sales orders, are updated with the details of the shipment. Finally, the billing due list is updated. The billing due list is a list of deliveries for which the billing step can be exe- cuted. We now turn our attention to billing.
Demo 5.7: Process shipment for a sales order
BILLING
The purpose of the billing step is to create a variety of documents such as invoices for products or services as well as credit and debit memos. The billing step is also used to cancel previously created documents. Billing can be based either on deliveries that have been shipped to customers or on orders that have not yet been delivered. This step utilizes organizational data, master data, and transaction data from previous process steps. Like shipping, billing has several outcomes, some of which impact other processes. Figure 5-38 illustrates the elements of the billing step.
Figure 5-38: Elements of the billing step
Data
Billing, with reference to delivery documents, utilizes data from the delivery document and the sales order, such as material number and quantities (Figure 5-39). Master data, such as customer master and pricing conditions, are the source of pricing data and partner function (bill-to party). In addition, billing utilizes organizational data relevant to the fulfi llment process, client, company code, and sales area.
CH005.indd 160CH005.indd 160 31/01/11 6:39 AM31/01/11 6:39 AM
Process 161
Figure 5-39: Data in a billing document
Tasks
The key task in the billing step is to generate a billing document, typically an invoice for materials or services. As previously mentioned, the invoice can be created on the basis of either a delivery or a sales order. Figure 5-19 depicts a scenario in which shipment is sent prior to billing. However, if the company wishes to be paid before it ships the materials—which is frequently the case when the customer is new or has a poor payment history—then the process can be modifi ed so that billing will take place prior to shipment. Our discussion focuses on billing that is based on deliveries.
Other billing documents that are sometimes created are credit and debit memos. A credit memo is a refund the company issues if the customer returns the materials or if the initial invoice overcharged the customer. The company uses a debit memo when the customer was undercharged in the original invoice. A debit memo increases the amount owed by the customer.
As you can see in Figure 5-40, multiple deliveries can be combined to cre- ate one billing document. This process can be employed only when the deliv- eries share the same characteristics with respect to payer (partner function),
Figure 5-40: Relationship between deliveries and billing
CH005.indd 161CH005.indd 161 31/01/11 6:39 AM31/01/11 6:39 AM
162 CHAPTER 5 The Fulfi llment Process
billing date, and country of destination. Conversely, one delivery can result in multiple invoices. This is the case when the terms of payment for the items in the delivery are different. In these cases, a different billing document must be created for each term of payment. Note that when deliveries are combined, the partner function payer is relevant, not who placed the order (sold-to party) or who received the shipment (ship-to party).
Referring back to our RMB example, GBI has two options for billing: It can send an invoice after each shipment is sent, or it can wait until both ship- ments are sent and then prepare one cumulative invoice. GBI has elected to send separate invoices for each shipment.
Figure 5-41 illustrates the structure of a billing document (left side). The billing document header consists of the partner identifi cation such as the sold-to party and payer, billing date, document currency, payment terms, and the total. Each billing document item includes data such as material num- ber, quantity, and price. The fi gure also illustrates some of the data that are included in the billing document generated by GBI for the initial shipment (30 bikes and 100 t-shirts). GBI will subsequently generate another billing document for the remaining 10 bikes.
Figure 5-41: Structure of a billing document
Outcomes
Like shipping, billing has several outcomes related to accounting, creating doc- uments, and updating master data and documents. These impacts are presented in Figure 5-42.
Figure 5-42: Outcomes of the billing step
CH005.indd 162CH005.indd 162 31/01/11 6:39 AM31/01/11 6:39 AM
Process 163
When the billing step is completed, accounts receivable reconciliation and sales revenue accounts in the general ledger are updated. The accounts receivable account is debited by the amount of the invoice, which is the amount the customer owes, and the sales revenue account is credited by the same amount. Recall, however, that because accounts receivable is a rec- onciliation account, the amount of the invoice cannot be posted directly to the accounts receivable account. Instead, the amount is posted through the cor responding subledger account, in this case, the customer account. An open item is created in the customer’s account via a debit entry, which automatically creates an entry in the accounts receivable account. In addition to postings to the general ledger, an FI document is created to record these data. Finally, because the billing step increases the amount receivable from the customer, the available credit decreases by a corresponding amount.
Figure 5-43 illustrates the fi nancial impact of the invoice sent in our exam- ple. The invoice includes 30 bikes and 100 t-shirts. The bikes are billed at $2,800 each and the t-shirts at $27 each ($30 less 10% volume discount), for a total of $86,700 ($84,000 � $2,700). This total is debited to RMB’s account, which results in an automatic posting to the accounts receivable account. Finally, the revenue account is credited in the amount of $86,700. It is worth noting that inventory and cost of goods sold are updated during the shipping step, while revenue and customer/receivables are updated at billing. Further, gross profi t is calculated as revenue minus cost of goods sold. If revenue is less than the cost of goods sold, then the result is a loss rather than a profi t. In our example, GBI has a gross profi t of $43,200 ($86,700 – $43,500).
Figure 5-43: FI impact of the billing step
CH005.indd 163CH005.indd 163 31/01/11 6:39 AM31/01/11 6:39 AM
164 CHAPTER 5 The Fulfi llment Process
Billing has potential consequences in management accounting or con- trolling. For example, profi tability analysis uses revenue data from the billing step that are recorded via a controlling document. Finally, billing generates updates to several sales documents, such as sales orders and deliveries, the customer’s credit account, and statistics (information structures) in the sales information system.
Demo 5.8: Process billing for a sales order
PAYMENT
The fi nal step in the fulfi llment process is the receipt of payment from the customer. The payment is applied to the appropriate open items—that is, items that have not yet been paid—in the customer’s account. The elements of the payment step are diagrammed in Figure 5-44.
Figure 5-44: Elements of the payment step
Data
When a company receives payment from a customer, it retrieves the customer account to identify the open items. It then applies the payment to these items. Therefore, the payment step involves customer master data as well as organi- zational data.
Figure 5-45: Data in a payment document
CH005.indd 164CH005.indd 164 31/01/11 6:39 AM31/01/11 6:39 AM
Process 165
Tasks
The tasks in the payment step are to identify the open items and to apply the payment to these items. Customers make payment based on terms that were previously agreed upon. Further, customers can pay multiple invoices at once, or, conversely, can divide a single invoice into multiple payments.
Outcomes
When a customer payment is recorded, relevant general ledger accounts are updated, and a corresponding FI document is created. In our example, RMB has sent a payment for the fi rst invoice in the amount of $86,700. Figure 5-46 exhibits the general ledger impact of this payment. The bank account is deb- ited and RMB’s account is credited by the amount of the payment. This trans- action clears the open item in the customer’s account that was created during the billing step. Because the customer account is a subledger account, the cor- responding reconciliation account, accounts receivable, is also automatically credited. Finally, because the payment reduced the amount receivable from the customer, the customer’s credit limit increases by a corresponding amount.
Figure 5-46: FI impact of the payment step
In the above example, the customer pays the full amount owed. Very often, however, the amount paid is not the amount owed. This is the case, for instance, when the customer is entitled to discounts based on the payment terms. Under the terms 1%10/Net 30, for example, payment is due no later than 30 days of receiving the invoice, and the customer is entitled to a 1% discount if it makes payment within 10 days. If the customer meets the terms
CH005.indd 165CH005.indd 165 31/01/11 6:39 AM31/01/11 6:39 AM
166 CHAPTER 5 The Fulfi llment Process
for the discount, then the payment received will be less than the invoiced amount. Consequently, additional postings are included to refl ect the discount. Specifi cally, the bank account is debited by the amount of the payment, and the sales discount account1 is debited by the amount of the discount. The cus- tomer account and the accounts receivable reconciliation account are credited by the amount of the invoice, as shown in Figure 5-47. The only differences between Figure 5-47 and Figure 5-46 are that in Figure 5-47 the bank account is debited by a smaller amount (amount owed less discount), and the difference (discount) is debited to the sales discount account. The customer account and the A/R account are credited by the amount owed.
Figure 5-47: Customer payment with discount
In cases where the payment is not equal to the amount of the invoice and no discount is applicable, then two scenarios are possible. In one scenario, the amount of the difference is so small that it is insignifi cant. In such cases, the company either charges off or writes off the difference using an appropriate general ledger account, and the invoice is considered paid. A difference is gen- erally considered small if it falls within the tolerance limits specifi ed in the system. When the difference falls outside tolerance limits and therefore is con- sidered signifi cant, the payment is handled either through the partial payment technique or the residual item technique. Under the partial payment technique, the payment is posted to the customer account, and the original invoice item remains open. Under the residual item technique, the original item is closed, and a new item for the balance is posted to the customer account (and the cor- responding reconciliation account). Figure 5-48 diagrams all of these scenarios.
1 GBI records all discounts related to sales in one account, the sales discount account. This includes discounts offered at the time of receiving the sales order as well as discounts related to payment. It is not uncommon to record these in different accounts, depending on the reporting needs of the company.
CH005.indd 166CH005.indd 166 31/01/11 6:40 AM31/01/11 6:40 AM
Credit Management Process 167
Figure 5-48: Processing customer payment
Demo 5.9: Process payment for an invoice
CREDIT MANAGEMENT PROCESS In our discussion of the fulfi llment process, we assumed that the customer has suffi cient credit. In this section we briefl y discuss the credit management process, which businesses use to assess whether a customer should be granted credit to purchase and receive goods prior to payment. The credit manage- ment process can be confi gured to make this assessment at three points dur- ing the fulfi llment process: (1) when the sales order is created or changed, (2) when the delivery is authorized (delivery document created) or changed, and
CH005.indd 167CH005.indd 167 31/01/11 6:40 AM31/01/11 6:40 AM
168 CHAPTER 5 The Fulfi llment Process
(3) when the post goods issue is performed during shipping. The process can further be confi gured to consider a variety of criteria when making this assessment, including the amount of current receivables from the customer and the number and amount of open sales orders, scheduled deliveries, and open invoices. In addition, third-party sources of credit data, such as Dunn & Bradstreet, can also be utilized. The total credit exposure is calculated as the sum of the value of open orders, scheduled deliveries, open invoices, and the value of the current sales order. If the credit exposure exceeds the credit limit, then the company must select one of three possible outcomes: (1) warn the user and allow the process to continue, (2) display an error and do not allow the process to continue, and (3) block delivery of the order. All three outcomes are possible when the sales order or delivery document is being created or changed. During the post goods issue, however, the only option is to block the goods issue from being posted.
Figure 5-49 diagrams the additional credit management steps that are initiated when the sales order is created. First, the company performs a credit check. If the credit exposure falls below the credit limit, then the fulfi llment process continues. If it exceeds the credit limit, the fi gure illustrates the out- come where the delivery of the order is blocked. The order is saved, but it will remain in the delivery blocked status until it is reviewed by a credit manager, who will either approve or reject it. If the manager approves the order, then the delivery block is removed, and the order is released for further processing. Conversely, if the manager refuses to extend credit, then the order is rejected, and the customer is informed of this decision.
Figure 5-49: Credit management process
CH005.indd 168CH005.indd 168 31/01/11 6:40 AM31/01/11 6:40 AM
Integration With Other Processes 169
INTEGRATION WITH OTHER PROCESSES The fulfi llment process is tightly integrated with many other processes. We identifi ed numerous integration points in the discussion of the process steps and will elaborate on them in other chapters. Below we summarize the key integration points, which are presented in Figure 5-50.
Figure 5-50: Integration with other processes
Because fulfi llment involves both revenues and payments, a clear rela- tionship exists between fulfi llment and fi nancial accounting. For example, some of the master data utilized in fulfi llment, such as customer master and material master, are jointly maintained by sales and accounting. In addition, the shipment, billing, and payment steps have an impact on the general ledger. Fulfi llment can also impact the profi tability analysis process in management accounting, which utilizes sales revenue data.
Going further, during sales order processing, when the company con- ducts availability checks it employs data from inventory management, produc- tion, and purchasing, which are the sources of the materials for shipment. Sales data are also used by materials planning to schedule the procurement and pro- duction of materials. Another fulfi llment step, goods movement, is related to inventory management. In addition, warehouse management processes (such as picking) can be initiated during shipment.
Fulfi llment is also related to project systems. Recall from Chapter 1 that enterprises use projects to create complex products for customers, such as an aircraft. Customer orders for such products are processed using the fulfi llment process. However, instead of preparing and sending shipments, as described in this chapter, the customer requirements are transferred to the project manage- ment process. In turn, project systems infl uence deliveries and billing.
CH005.indd 169CH005.indd 169 31/01/11 6:40 AM31/01/11 6:40 AM
170 CHAPTER 5 The Fulfi llment Process
Finally, in the process section we explored the relationship between the fulfi llment process at GBI and the procurement process at RMB. These processes are executed in different companies using different ERP systems. Nevertheless, for both processes to operate effi ciently, the two companies must integrate on a process level and a technical level at multiple stages.
REPORTING As discussed in previous chapters, SAP ERP provides several reporting options including online lists, work lists, and analytics. An additional reporting option in fulfi llment is the document fl ow, which identifi es all the documents related to a customer order. We examine these options in this section.
DOCUMENT FLOW
Throughout this chapter we have examined many of the documents associ- ated with the fulfi llment process, including inquiries, sales orders, delivery documents, billing documents, and payment documents. Signifi cantly, all of the documents related to one inquiry or sales order are linked together in a document fl ow. A document flow displays all of the documents associ- ated with the steps that have been completed for a single customer inquiry or order. The document fl ow is updated after each process step is completed. Figure 5-51 illustrates a document fl ow for a completed process that started with a sales order (rather than an inquiry). The document fl ow essentially dis- plays the history and status of the sales order. For example, if a delivery docu- ment is included in the document fl ow but a goods issue is not, then we can conclude that delivery is in progress and the shipment has not yet left the ship- ping point. This conclusion assumes, of course, that the data in the ERP system are up to date and accurately refl ect the activity in the physical system. Any of the underlying documents, such as the sales order or invoice, can be retrieved and displayed from the document fl ow, if more details are necessary.
Figure 5-51: Document fl ow. Copyright SAP AG 2011
CH005.indd 170CH005.indd 170 31/01/11 6:40 AM31/01/11 6:40 AM
Reporting 171
Demo 5.10: Display document fl ow
WORK LISTS
Work lists identify tasks that are ready for completion. These lists can be gen- erated for each task involved in fulfi llment, such as preparing deliveries, pick- ing, post goods issue, and billing. Figure 5-52 displays a series of work lists associated with fulfi llment tasks.
Figure 5-52: Work lists
One example of a fulfi llment work list is a delivery due list or a shipping work list, which is essentially a list of orders that are scheduled to be shipped by a specifi c date. Another example is a list of orders that have been shipped but not billed. Lists can be generated for specifi c dates and for specifi c organiza- tional elements, such as a shipping point. In addition, tasks included in the list can be selected for processing individually or collectively. For example, a delivery due list will display all sales orders that should be shipped for on-time delivery. The user can select a single a sales order for individual processing and create a delivery document for that order. Alternatively, the user can select several sales orders for collective processing and create delivery documents for all of them simultaneously.
CH005.indd 171CH005.indd 171 31/01/11 6:40 AM31/01/11 6:40 AM
172 CHAPTER 5 The Fulfi llment Process
Demo 5.11: Display a work list
ONLINE LISTS
Online lists are used to generate lists of documents associated with specifi c master data. In the context of fulfi llment, any of the documents discussed ear- lier can be displayed for specifi c customers or materials or a combination of the two. Figure 5-53 is an example of a list of sales orders for a particular sold-to party. The fi gure displays three orders, labeled 1241, 1549, and 1600. Recall that online lists are displayed using a list viewer or an ALV grid. These techniques provide several options for displaying results, such as sorting and summation.
Figure 5-53: List of sales orders
Other examples of online lists are:
- List of delivery documents for a specifi c customer
- List of sales orders for a specifi c combination of customers and materials
- List of delivery documents for a specifi c material or material group
CH005.indd 172CH005.indd 172 31/01/11 6:40 AM31/01/11 6:40 AM
Reporting 173
Demo 5.12: Display online list
ANALYTICS
Figure 5-54 depicts the information structures used in the sales information system. Standard information structures store data based on organizational elements—sales organization and shipping point, for example—as well as mas- ter data such as customer and material.
Figure 5-54: Information structures
Information structures are used to generate both standard and fl ex- ible analyses. Figure 5-55 provides an example of standard analysis, specifi – cally, an analysis of sales that includes sales organizations, order value, and invoiced amount. It further demonstrates a drilldown to display customers (Philly Bikes and Motown Bikes) for a selected sales organization (UE00). Drilling down for one customer (Philly Bikes) reveals data for each time period (month).
CH005.indd 173CH005.indd 173 31/01/11 6:40 AM31/01/11 6:40 AM
Relationship Between Schedule Lines and Delivery Items
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
You Can Also Place the Order at www.collegepaper.us/orders/ordernow or www.crucialessay.com/orders/ordernow