Understanding the Embedded LSP Process

In the embedded LSP business scenarios, some organizational units take care of the logistical activities of the group company. These units can either be separate business units, exclusively managing the transportation activity, or business units that take care of transportation for their own needs and those of other business units.

This leads to a scenario in which such embedded organizational units must take care of the settlement with carriers for outsourced transportation, as well as the settlement with internal business units, billing them for the transportation service provided.

You need support for external and internal financial reporting of all such relevant financial transactions to reflect on the financial statements, such as balance sheet and profit and loss statements, and other management accounting statements.

The main models for embedded LSP scenarios are outlined below:

• Model 1 Exclusive logistics and transportation with own company code

  One organizational unit cares for the logistical activities of the group.

• Model 2 Exclusive logistics and transportation with own company code and external orders

  One organizational unit cares for the logistical activities of the group and serves for external companies.

• Model 3 One organizational unit has transportation services, additionally

  One organizational unit participates in the core business of the group and cares for the logistical activities of the group.

For the Embedded LSP models shown in the figure, the relevant terminology is as follows:

• Group company: A financially and legally independent organizational center that is not tied to a geographical location and that is registered under business law. In this example, Super Animal Trading (SAT) is the group company.
• Company Code: The smallest organizational unit for which a complete, self-contained set of accounts can be drawn up for the purposes of external reporting. In this example, SAT 1 (producing pigs), SAT 2 (producing cows), and SAT 3 (internal LSP) are covered under the group company SAT.
• ECL stands for "Efficient Cargo Lines", a carrier doing business with SAT3 & 1.
• EXT is an external company using SAT3 as carrier/ service provider in model 2.

Company_C1, Company_C2, and Company_C3 belong to the same enterprise. Company_C1 manufactures products, but also provides transportation services for Company_C2 and Company_C3.

Company_C2 and Company_C3 act as internal shipper companies, buying transportation services from Company_C1. Company_C1 acts as a forwarding house. It buys transportation services from Logistics_Service_Provider_LSP, and sells transportation services to Company_C2 and Company_C3.

Transportation Management (TM) creates an order-based transportation requirement (OTR) or delivery-based transportation requirement (DTR) for each of the sales orders or deliveries that each company has in place with their respective customers in Sales and Distribution on an external S/4 HANA or SAP ERP system. Company_C1 then creates a freight order for the OTRs or DTRs, with itself as the purchasing organization in TM. It sends the freight order to Logistics_Service_Provider_LSP.

Logistics_Service_Provider_LSP collects the cargo at the warehouse and delivers the cargo to multiple destinations. The destination locations are geographically close together. Logistics_Service_Provider_LSP sends an invoice to Company_C1 for the freight order. Company_C1 pays Logistics_Service_Provider_LSP. Company_C1 uses the internal settlement process to recover the cost of providing the transportation service from Company_C2 and Company_C3.

In a group logistics scenario, Company_C1 can create and post internal settlement documents when the life cycle status of the freight order is In Execution.

To run a group logistics process, you must integrate orders based on orders created in Sales and Distribution (SD) or Materials Management (MM), and deliveries created in Logistics Execution (LE) from an external S/4 HANA or SAP ERP system with a TM component.

The steps for embedded LSP configuration are as follows:

• Assign the settlement profile and calculation profile to the organization unit:

  In Customizing, choose Transportation Management→Basic Functions→Charge Calculation→Basic Settings→Define Charges Profiles.

• Create the internal settlement document type:

  In Customizing, choose Transportation Management→Settlement→Forwarding Settlement→Define Forwarding Settlement Document Types.

• Create an internal agreement:

  In the SAP Fiori launchpad, choose Contract Management→Create Internal Agreement.

• Enable the freight order (FO) or freight booking (FB) type for cost distribution:

  In Customizing, choose Transportation Management→Freight Order Management→Define Freight Order Types.

• Specify the purchasing organization of the freight order or freight booking that is executing the stage as a forwarding house:

  In transaction PPOME, choose your Purchase Organization→tab Org. Data→Field Org. Unit Function: Forwarding House.

These steps are common to setting up both intracompany and intercompany settlements.

By default, the SAP TM system creates an intercompany settlement document for organizations that belong to different company codes. If you want to use an intracompany settlement for a company organization, you must select the Intracompany Settlement checkbox in the Org. Data tab page of the relevant organization structure. You can access the structure using transaction PPOME.