Distributing Freight Costs

Transportation Management (TM) in SAP S/4HANA Cloud Public Edition supports transportation planning, execution and its financial settlement. Typically, freight to several customers is consolidated in a freight order. This leads to the question of how to allocate the freight costs invoiced by the carrier for the freight order to the delivery items that have been transported with the freight order.

In an outbound process thereafter, only the relevant part of the freight cost needs to be billed to the customer for each of his or her delivery items. For this purpose, you need to break down the aggregated freight cost of the freight order to the level of a delivery item. The system posts the costs to a material valuation in an inbound process, and to an expense account (general ledger) in an outbound process.

Costs can be distributed in a freight order when the following criteria are met:

• Freight units in a freight order originate from an order or a delivery

• Charges are calculated with no calculation errors

How the freight costs are distributed to the relevant delivery items is controlled by the distribution profile that you have assigned in the charges profile of your purchasing organization. Four different distribution profiles are available:

• SDP_ODI_GW - Cost distribution proportional to gross weight
• SDP_ODI_NW - Cost distribution proportional to net weight
• SDP_ODI_GV - Cost distribution proportional to gross volume
• SDP_ODI_DW - Cost distribution proportional to distance times weight

After confirmation of the freight order or freight booking for accruals posting, a service purchase order and a service entry sheet is created automatically in a background process. These documents are the basis for the invoice verification. Additionally, freight cost allocation documents are created as follows depending on whether the underlying base process is an inbound or outbound process:

• Freight Cost Allocation (Expense)

  in all the legal ledgers for outbound transportation scenario (sell from stock, freight costs in the delivering company for ICO stock transport order and ICO intercompany sales process)

• Freight Cost Allocation (ML-Account)

  in all legal ledgers for inbound transportation scenario (procurement of material, inbound transport costs related to the ICO Stock transport order by the receiving company)

To see the details of the freight cost allocation document, you can use the Monitor Freight Cost Allocation documents app. Depending on the selected freight cost allocation document, the freight cost allocation (expense) or the freight cost allocation (ML-Account) screen appears. Among others, following details are displayed:

• Posting Status
• Posting Date
• Company code
• Net Amount
• Settlement Document Type

In the Items table of the freight cost allocation document, you can identify which products were shipped in the freight document and the allocated freight costs per product. The same information is also displayed in the Monitor Accrual Posting, Manage Freight Orders, or Manage Air/Ocean Freight Bookings apps on the Cost Distribution tab of the respective freight document. In case of errors in the release of the freight cost allocation documents to Accounting, you find these freight cost allocation documents in the Not Released Documents, which must be released after detailed evaluation of the errors. To evaluate the specific error in the freight cost allocation document, you select Freight Cost Allocation Document in Error.

The following example illustrates the cost distribution logic.

The cost distribution status of a freight order is either Not Performed, if any of the prerequisites have not been met for the freight order or Successful. You can review the relevant freight cost allocation document in the Manage Freight Cost Allocation Documents app. The system automatically releases the freight cost allocation document to accounting.

Transportation costs may need to be part of the billing document and can be invoiced to the customer. You can check details in the Pricing Elements section while creating the billing document. Locate the condition type, which lists the freight costs. The amount shown there should be equal to the respective amount in the freight order under Cost Distribution→Distribution Items. For transportation management scenarios that are initiated from a sales document, the freight cost of the freight order can be taken into account when the corresponding billing document is created. This requires an integration to be set up between the transportation management, pricing, and billing processes, so that the freight costs can be added to the final amount due.

A typical use case for this scenario is when you want to charge the buyer back for the freight cost incurred for you as the seller. In effect, this allows the costs for a delivery that are initially paid by the seller to be passed on to the buyer by adding them to the invoice for the sales transaction.

The following prerequisites need to be met for this process:

• The Order-Based Transportation Consolidation (3EP) scope item needs to be activated (please check the setup instruction guide) and charges need to be calculated in the freight order.

• To enable the integration on the sales billing side, a key user must make settings in the Define Copying Control for Delivery Document to Billing Document configuration step within the Copying Control for Billing Documents configuration item.

  In this configuration step, the setting for price source for the relevant document types must be set to the value I (order / freight order).