Maintaining Order Confirmation and Goods Receipt Process in a Distribution Center

Objectives

After completing this lesson, you will be able to:

  • Maintain Order Confirmation and Goods Receipt Process in a Distribution Center

Order Confirmation

Use the confirmation control to define the sequence in which the individual confirmations (= confirmation categories) are due to arrive.

Confirmation categories define the following:

  • The date and time by which the confirmation must have arrived

  • The relevancy for requirements planning and goods receipt

  • The kind of confirmation is as follows: simple order confirmation, advanced shipping notification (ASN), rough goods receipt (delivery note)

  • The confirmation sequence if more than one confirmation is expected

The confirmation control key is defined in Customizing. It can be assigned to the vendor or article master data. If the confirmation control key is assigned to the vendor master, it can be copied from there to the article data (purchasing info records) for this vendor. It is either copied to the order item from the article master data, or it can be entered in the order item manually. When you want to use Handling Unit Management in your distribution center, the confirmation control key "Inbound delivery" is required, as the inbound delivery (shipping notification) provides the detailed information for each Handling Unit regarding packed items and their quantities as well as the packaging materials used. This is required for an efficient goods receipt posting, since the handling units should not be opened up for detailed quantity checks.

When a purchase order is saved, an output message is created for the purchase order. These messages are based on message records, which are created using a message type from customizing.

The message type (output type) defines which information is to be sent, the processing routines for the various media (for example, printed form, EDI, fax), and, for example, default values for the time the message should be sent:

  • Immediately after the purchase order is saved

  • At defined intervals (periodically scheduled job, or with additional time specification)

  • By application specific program (online or in background)

The message records can be created, for example, by EDI (electronic data interchange) vendors, or by document type/purchasing organization/vendor, or by document type. When you create the message record, you can specify which media is to be used, for which partner function, date/time, and in which language the message should be processed, which output device (for example, for print output) should be used, and so on.

Shipping notifications, also called Advanced Shipping Notifications (ASN), are used by vendors to announce the delivery of articles. The vendor sends information about the delivery date, delivery time, delivery quantities, and the articles that are to be delivered. In addition, detailed packing information (handling units) can be included.

The shipping notification is based on one or more purchase orders that have been placed with the same vendor. An inbound delivery is created in SAP Retail for the shipping notification, received for example using mail or EDI. Inbound deliveries can be used as reference documents for the (rough) goods receipt that follows.

Goods Receipt Process in a Distribution Center

Goods receipt in a site (distribution center or store) can be done in one or two steps.

  • One-step:

    A (complete) goods receipt is executed directly

  • Two-step:

    A rough goods receipt (delivery note) is performed first, followed by goods receipt

In a one-step goods receipt in external procurement, the typical reference document is the vendor purchase order, or the shipping notification. In a two-step goods receipt, first the vendor’s shipping papers, specifically the delivery note, is captured in the system and matched up with the relevant reference document(s). This is to prepare the actual goods receipt. For posting a rough goods receipt, a relevant confirmation control key is required.

When a goods receipt is posted, the merchandise is assigned to a storage location at the site that receives the delivery, and also assigned to a stock type. If the destination storage location (for example, in the case of a distribution center) is connected to warehouse management, articles are further assigned to specific storage bins (putaway). Putaway can be physically restricted to individual storage areas (= a grouping of different storage bins within a storage type for the purposes of putaway).

You can create a goods receipt (GR) with reference to a vendor purchase order, a shipping notification (inbound delivery), or a rough GR. The goods receipt in a store for merchandise shipped from a DC can be posted with reference to the respective outbound delivery. Goods receipt processing with reference documents has the following advantages:

  • The goods receiving department can check if the delivery actually contains the merchandise that was ordered.

  • When the goods receipt is maintained, data for the reference document is suggested by the system, thus making it easier to create the goods receipt and also monitor the development of the goods receipt.

  • Goods receipt data is updated in purchase order history. This means that associates can monitor the purchase order history, trigger the dunning procedure, and ensure that quantities and deadlines are adhered to in the system.

  • The relevant purchaser can be informed automatically about the goods receipt.

You can also run checks on goods receipt posting, for example, relative to delivery quantities, shelf-life expiration dates (best before dates), shipping instructions, or GTIN.

One additional feature of the goods receipt is the possibility to enter returnable transport packaging items as special stock. Returnable transport packaging can be transport equipment (for example, a pallet) or empties (for example, bottles).

It is also possible to post a goods receipt without a reference document. This allows you to subsequently (automatically) generate a purchase order, thereby allowing you to use the regular logistics invoice verification function with price determination in the purchase order, and quantity determination from goods receipt. This is for example useful for unplanned returns.

The figure above, SAP S/4HANA Warehouse Options, explains which possibilities exist for using or connecting warehouse management systems to a DC's storage location in SAP Retail. Stores usually do not use warehouse management.

#1: It is not required to use a warehouse management system at all, so you can use MM-Inventory Management for the storage location of a distribution center. This means no warehouse number is assigned to the storage location. This, for example, can be used for a returns storage location, where merchandise is subject to a quality inspection upon arrival.

#2: Lean WM can be set up using fixed bin storage. Inventory management is still on site/storage location level, but a fixed bin can be assigned in the Logistics: DC view of the article master and is then displayed in the relevant WM documents, such as a transfer order. Lean WM requires a warehouse number to be assigned to the storage location in question, and a simple WM structure to be defined. This is the scenario used in our training system.

#3: As part of the compatibility packs, it is possible to use SAP Warehouse Management (WM) in SAP S/4HANA until the end of 2027 with extended maintenance option until end of 2030. SAP S/4HANA Stock Room Management reuses major parts of LE-WM and can be used beyond 2027. For details about this solution see the SAP Note 2270211 - S4TWL - Warehouse Management (WM). This enables customers to keep running their less complex warehouses, as SAP S/4HANA Stock Room Management is relevant for smaller warehouses with manual operations. It is mainly intended for existing customers.

#4, 5, and 6: The warehouse number is set up as decentralized warehouse, either with SAP Extended Warehouse Management (SAP EWM) based on the SAP Supply Chain Management (SCM) system, or on SAP S/4HANA, or with a non-SAP warehouse management solution. What needs to be considered is the mainstream maintenance for the SAP SCM based EWM, which is planned until end of 2027 (for SAP EWM 9.5). The embedded SAP EWM in SAP S/4HANA is the strategic go-to solution which will be developed further, for which SAP Fiori applications will be provided, and so on.

#7: In SAP S/4HANA, you can use the embedded EWM either as Basic Warehouse Management or Advanced Warehouse Management. The details are described in the Feature Scope Description of your SAP S/4HANA Release.

If stocks are to be managed within a storage location in a distribution center (site) at storage bin level, you can do this using the embedded Extended Warehouse Management (EWM) in SAP Retail, or connect a separate SAP Extended Warehouse Management system (based on the SCM system).

To do so, you must assign a warehouse number to the relevant storage location. The warehouse number represents the entire warehouse structure.

Parts of the warehouse that have different technical or organizational requirements are distinguished by different storage types in the warehouse number.

Examples: GR zone = storage type 9020, high rack storage area, bulk storage, GI zone = storage type 9100. To make goods receipt processing and picking easier, you can define several doors and staging areas under a warehouse number. A door can be used for either goods receipt or goods issue, or both. A staging area can be assigned to each door.

You can define storage sections as organizational subdivisions of a storage type, which group together storage bins with similar attributes for the purpose of putaway. The criteria for grouping bins together are freely definable - for example, heavy parts, bulky parts, fast-moving items, and slow-moving items.

Storage bins are defined within storage types, and can be grouped within the areas (storage sections/picking areas) defined for a storage type. The storage bins are identified by an 18-digit, alpha-numeric field, often used to reflect a coordinate system, for example, for high-rack storage: isle – stack – stack level. When articles are stored in storage bins, they are set as quants with all relevant attributes and data (goods receipt data, best before, handling unit number, batch number, weight, volumes, stock keeping units of measurement and so on).

Additional elements can be defined, which are related to the work processes in the distribution center. They even allow for capacity planning and labor performance calculations. These so-called activity areas and workstations are defined for a number of storage bins as well as for goods receipt- and goods issue staging areas within storage types.

The figure, Effects of Goods Receipt, provides an overview of the most important effects of goods receipts with reference to a purchase order. Transaction documents created with a goods receipt posting are article documents and also Financial Accounting/Controlling documents if the goods receipt is valuation-relevant.

A goods movement is a transaction that changes stock. The following types of goods movements are distinguished in the system:

Goods receipt (GR) is a goods movement in which the receipt of goods from an external vendor (or from production) is posted. A goods receipt leads to an increase in the warehouse stock. Relevant GR stock types are unrestricted-use stock, quality inspection stock, or blocked stock.

Goods issue (GI) is a goods movement in which a merchandise shipment to the customer, an article withdrawal or issue, or consumption is posted. A goods issue leads to a decrease in the warehouse stock.

Stock transfer consists of removing articles from one storage location and putting them away in another storage location. Stock transfers can take place both within the same site and from one site to another (also in different company codes). The sites can be both distribution centers and stores.

A transfer posting is a general term for stock transfers and changes to an article's stock identification or category. It is irrelevant whether the posting relates to a physical movement or not.

The single-screen, generalized Goods Movement function - Post Goods Movement - is available for each of these activities. You can also use it to display the article documents created in these postings.

Goods movements are controlled by movement types. These 3-digit numbers for example control, which reference documents (if any) are used for the posting, such as a purchase order for a goods receipt posting. Movement types play an important role in the updating of quantity fields, of stock and consumption accounts (account determination), and in determining which fields are available when entering a document in the system. For each goods movement activity, the Post Goods Movement transaction can be set up to default a relevant movement type.

In this application, the overview tree on the left hand side displays the last ten documents for your purchase orders, sales orders, article documents, and data on hold. This means you always have an overview of your most recently performed activities. You can also set user-specific default values, for example, for the actions such as goods receipt, cancellation, transfer postings, and so on. You can maintain a default site and storage location, and further general settings.

Inventory Management and Valuation

Business Example

During the implementation phase, the logistics and accounting teams discuss the various valuation and inventory management options in SAP Retail. They decide to regularly use quantity-based inventory with moving average price valuation. In addition, they want to know the stock value at retail at any point in time. However, in some of the stores, and for only few specific merchandise categories, the value-based inventory management at retail should be activated.

Inventory Management Types

If inventory management (IM) for an article is carried out on a quantity and value basis, it means that both the stock quantity, as well as the stock value are updated, along with G/L accounts in Financial Accounting and Cost Accounting, based on the Material Ledger.

The logistics process is split into the merchandise flow, and the value flow. IM is updated with every transaction that leads to stock changes, such as goods receipt, goods issues, transfer postings, and stock transfers. In any case, not all goods movement postings are relevant for valuation. For example, if an article in a distribution center is posted from one storage location to another one within the site, or from stock type quality inspection to unrestricted use, no accounting document is created for the goods movement article document. Accounting is only affected when a change in valuation takes place as, for example, in a site to site stock transfer.

If inventory management is on a quantity basis only, no accounting data is maintained in the article master record. When a goods movement is posted, only the stock quantities are updated. The system does not update the article stock value or the accounts in Financial Accounting and Cost Accounting.

Value-based inventory management means that valuation takes place for a group of articles at the retail (sales) price, so the sales price must be available for each of these articles. Often, the group is the merchandise category, but it is also possible to use value-based inventory management on a merchandise category hierarchy level or, on the other hand, to split a merchandise category for value-based IM by using Group value-only articles. Nevertheless, for accounting purposes, the system internally determines a calculated purchase value for the value-only posting article, as stock valuation in general is carried on the cost price level. Usually, there is no information on quantities in value-based IM.

You use the article type in Customizing to specify how an article is managed on a value basis and quantity basis. Examples of typical article types provided in the standard version include raw materials, trading goods, fashion, perishables, and empties.

Quantity-based IM uses three stock types, which indicate the way in which an article can be used:

Unrestricted-use stock is not limited in any way. Articles in quality inspection stock must be moved to unrestricted-use stock before withdrawal. The same is true for blocked stock.

For each goods receipt, you decide which stock to post the quantity to in the system. Exact stock information, for example, is important for determining availability of stock in requirements planning and also for picking in inventory management.

Besides stock types, the stock can also be posted using special stock indicators. For example, these are vendor consignment, which is externally owned special stock (allowed for all 3 possible stock types), or returnable transport packaging (RTP) stock, which is only allowed in combination with stock type unrestricted use. With that, you can keep non-valuated RTP special stock data for each vendor and storage location.

Goods receipt blocked stock can be used, for example, when posting goods receipt at the warehouse, if the goods are only to be accepted conditionally. The goods are then non-valuated but are displayed in the purchase order history for the item.

This stock is not assigned to a specific storage location. SAP Retail usually provides all necessary movement types for any kind of stock posting, from goods receipts with or without reference, returns, return deliveries, receipts free of charge, for any kind of transfer posting such as split or create structured articles, to different goods issue movement types and movement types specific to Physical Inventory. Movement types, stock type, and special stock indicators allow for exact inventory management and accounting.

The article stock is displayed on the individual organizational levels in the stock overview. The quantities posted for a specific stock type are added up for each organizational unit.

In addition to the client, site and storage location organizational units, it is also possible to have a stock overview of batches/valuation type and special stocks (for example, consignment article). You can group the sites in a site hierarchy (class type 035) for the stock overview. For example, the site hierarchy could reflect the regional structure.

The stock overview is a static representation of the article stocks. This means that only the current stock levels are directly displayed. Goods receipts and issues planned for the future are not displayed in this list when calling the stock overview from the article master. Using the menu bar, you can, however, call up further information, such as the info on the purchase and possibly sales value of the given quantity. Furthermore, it is possible to for example call the current requirements/stock list, and a list of open purchase orders for a specific site and article.

In the Display Advanced Stock Overview app, it is possible to additionally select special stocks and stock commitments. These are, for example, planned goods receipts and issues (open order stocks, sales order stock, and so on), as well as consignment stock, and can be displayed in the Segregated list (button: Individual list) for an article/site, or article/site/storage location combination. You can call the stock overview in different display versions that vary according to the listing and sequence of the individual stock types. In the customizing of the display versions you can determine the stocks that appear in the individual columns and in what sequence the columns are displayed. The Purchase/Sales Price Stock can be viewed via the Value-based stock button.

Valuation

This section acquaints you with the different valuation options. Stocks are always valuated at the cost price, since stock valuation is a part of balance sheet accounting. In SAP Retail, often the sales value of stocks is updated as well.

Article valuation is not a separate functional area, as most of the functions are carried out automatically. Depending on the organization, the activities that are performed manually are part of the functional areas of inventory management, invoice verification, or accounting.

Article valuation connects Logistics and Financial Accounting by accessing and updating the G/L accounts. The value of an article stock results from the simple formula, with article price being the cost price plus planned delivery costs:

Stock value = stock quantity * article price

Therefore, the stock value changes if the stock quantity or the article price changes. This calculation can be based on the cost price (= first price for an article taken for the first goods receipt) and the retail price. For the balance sheet valuation, SAP Retail supports both lowest value and LIFO valuation.

The Price control indicator allows you to choose how the stock of an article should be valuated. You have the following options:

  • Standard price valuation

  • Valuation at the moving average price (MAP)

Changing the valuation procedure does not affect already posted values, which means that the procedure can be changed at any time if the customizing setting allows this.

The type of price control used for an article is defined in the Accounting view when creating the article master record. It is possible to valuate merchandise at standard price or moving average price (MAP). You can define a proposal for this in Customizing for the article type. There, you can also determine, if the proposed price control can be changed in the accounting view of the article master record, or if it is fixed.

If you have decided on article-specific inventory management and standard-price valuation, you define S for standard price as the price control procedure with a corresponding standard price in the article master record.

The purchase price of the article is stored in the Purchasing view, for example under condition type PB00. If the purchase price is defined before the standard price in the article master, it is transferred as the default value for it.

With most goods movements in inventory management, the stock quantity, and hence also the stock value, changes: goods receipts increase the stock value, goods issues reduce it. With all goods movements (for example, a goods receipt), articles for which price control procedure S has been defined are valuated with the standard price. This means that the total value of the article is calculated from standard price multiplied by quantity. If differences occur in the goods movements (for example, purchase and standard price differ), they are posted to a price difference account.

If you have decided on article-based inventory management and valuation at the moving average price MAP, you define V as the price control procedure. When an article is created, the purchase price is taken as the first MAP. If you have not yet entered a purchase price (PB00) in the master data, the value 0 is shown as the initial MAP, and will be replaced with the value of the first goods receipt.

In the case of the moving average price, all receipts (for example, goods receipts) are posted with the receipt value (for example, the purchase price of a purchase order). In the first goods receipt, the valuation price is the same as the purchase price. The moving average price is then determined by changes to the purchase price and deviations from the cost price according to the formula. The moving average price that is displayed in the article master is a rounded value. The exact price (calculated using the quotient from the stock value and stock quantity) is always used for valuating goods movements. Price differences occur only in exceptional circumstances, for example, if there are stock shortages in invoice verification or if there is negative stock:

From a stock of 0 or with a negative stock, the moving average price is no longer changed. For goods receipts that do not result in a positive stock, the differences between the purchase and the frozen MAP are posted to a price difference account. As soon as the stock becomes positive again, the frozen MAP is replaced by the purchase price of the first goods receipt that resulted in positive stock.

The initial situation is a total stock of 100 EA at a MAP of 10 USD. Next, a purchase order is created for another 100 EA, but the purchase price has doubled to 20 USD. Valuation takes place with the goods receipt posting: the stock increases to 200 EA, and the MAP is adjusted to 15 USD.

Valuation at retail is optional (for information purposes), when article-based inventory management is used. When retail price valuation is active, the system additionally updates the retail value (total value at SP), besides the regular cost value details. These are the price control (S or V), the stock quantity (total stock), and the cost value (total value), which can be found in the article master, logistics view. From there, you can call the accounting view.

As mentioned, valuation at retail (sales price valuation) is optional, and for information only with article-based inventory management. However, the activation of valuation at retail is mandatory for value-based inventory management, as value-only inventory management is based on the retail (=sales) price of an article. The system then internally calculates back to a purchase value for accounting purposes.

In SAP Retail, the valuation area always corresponds to a site. Therefore, the retail price valuation can be activated for each site as required. If valuation at retail is active, you must specify a revaluation profile for revaluation at retail. This profile defines, for example, whether or not revaluations are to affect margins.

In addition, the distribution chain which carries the retail price conditions, should be specified accordingly. If blank, the system automatically uses the sales prices stored on the site's main distribution chain.

Note

For value-based IM, additionally the profile for value-based inventory management has to be set in the site master record. It specifies whether, and on which level, value-based inventory management is defined for a site.

Value-Based Inventory Management

In value-based inventory management, goods movements are not posted on an article basis. The system does not perform an update on a quantity basis but only on a retail value basis, which is posted to a value-only article. The value-only article that is to be posted is determined by the system using the settings in the store master record and merchandise categories.

To fine-tune value-based inventory management in a merchandise category, you can create several group value-only articles in this merchandise category. It is also possible to post selected articles individually in a merchandise category of this nature, for example, when these are particularly valuable articles.

A merchandise category hierarchy value-only article can be created for a merchandise category hierarchy node. It incorporates all the articles in the merchandise categories under that node.

If a store uses cross-merchandise category inventory management, a merchandise category hierarchy level has to be chosen as inventory management level.

Usually, value-based inventory management is only used in specific scenarios for stores, and not at all in distribution centers.

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