Managing Charge Calculation Master Data

A Freight Agreement is like a master contract between a company that must ship goods (shipper) and a company that provides transportation services (carrier). It outlines the terms, conditions, and pricing for transportation services over a specific period.

Components of a Freight Agreement (in hierarchical order):

1. Freight Agreement (FA): This is the top-level document containing all the contract details.
2. Calculation Sheets: These are attached to the freight agreement and define how transportation charges are calculated. Multiple calculation sheets can be linked to a single freight agreement.
3. Rate Tables: These are part of the calculation sheets and contain the actual prices for transportation services. Rate tables use scales to define pricing based on various factors.
4. Scales: These are the building blocks of rate tables. Scales define the dimensions or parameters that affect pricing, such as weight, distance, or volume.
5. Charge Types: These are used within calculation sheets to classify different charges, such as base rates, surcharges, or discounts.

How they relate:

• A freight agreement can have multiple calculation sheets to cover different scenarios or service types.
• Each calculation sheet contains multiple charge types and refers to one or more rate tables.
• Rate tables are built using scales to define how prices change based on different factors.
• Scales provide the foundation for creating flexible and detailed pricing structures within rate tables.

Think of it like this: The freight agreement is like a book that contains the terms of your shipping contract. Calculation sheets are the chapters in this book, each dealing with a specific type of shipment or service. Charge types are the different categories of fees mentioned throughout the book, and rate tables are the detailed price lists. Scales are the rules that determine how prices in these lists change based on factors like weight or distance. This structure allows for a flexible and detailed way to manage complex pricing and terms for transportation services while keeping everything organized under a single agreement.

When shipping products to customers via a third party, an organization must account for and recognize the costs of moving goods.

TM provides a broad and flexible calculation process. With the integration of MM, integration to the Financial Accounting (FI) and Controlling (CO) applications allows an organization to perform payment, execute billing transactions, and trigger the settlement process to accrue the proper transportation charges to financial accounts.

The master data elements required for charge calculation are freight agreements, calculation sheets, rate tables, and scales. For all of them, you can create templates to minimize the effort when new master data is required.

Freight agreements (FAs) are the basis for calculating transportation charges. You use FAs to calculate transportation charges billable to you by your carrier.

The system determines the agreement based on organization, business partner, validity period, and preconditions. In the freight agreement type customizing activity, you can configure whether one or multiple partners can be entered into the agreement. That is if you have one freight agreement with a carrier that is valid for numerous purchasing organizations,

Agreement Structure Overview:

Watch the simulation Explain a Freight Agreement to learn about the content of a freight agreement.

Calculation sheet maintenance is a step in the process of setting up master data in the Transportation Charge Management (TCM) component. It is integrated with agreements, rate tables, and scales. You can use the master data cockpit to access an overview of the charge management master data per organizational unit, business partner, and charge type. The system also shows the relationship between the different types of charge management master data.

You can use a template to create a calculation sheet and calculation sheet line items. The calculation sheet includes transportation charge elements, subtotals, and totals.

It provides for a calculation schema showing the steps and the specifications for the charges. The resulting charges, sub-totals, and totals can be displayed in the documents based on the calculation sheet.

The calculation sheet items have the following attributes:

• Charge Type
• Rate

  Rates contain details of the rate table for each standard charge item. It is also possible to enter fixed rates or percentages of other lines in the calculation sheet.

• Dimensional Weight Profile

  The system uses the dimensional weight factor in the dimensional weight profile to convert a product's gross volume into dimensional weight. The system then uses the dimensional weight to apply the correct rate. Note that a dimensional weight profile at the line item level of a calculation sheet has priority over a dimensional weight profile in an agreement.

• Calculation Resolution Base (for example, root, container, product, and stage)

  During charge calculation, the system determines the calculation resolution base by the origin of the data upon which the charge aspect is based. You can define the charge aspect in the resolution base objects, such as container, product, and stage.

  • Root: This is the document's header, which includes the freight order or the freight booking.

  • Stage: To utilize stage attributes such as distance between the shipper location and the port of loading.

  • Container: When the container's gross weight will be used for the calculation.

  • Product: When product attributes like product quantity, weight, or volume need to be used.

  For example, you want to determine the freight rate based on the gross weight of the order. To do this, you must use the calculation resolution base of root. If, however, you want to calculate the freight per package, the calculation resolution base should be package.

• Resolution Base Grouping Rule (for example, destination location, weight, volume)

  The rule the system uses to group selected input data, for example, destination location, weight, and volume. You use the grouping rule and the resolution base to group charge lines using the calculation base specified in the Group By field of the grouping rule.

• Calculation Method (for example, standard or break-weight)

  The calculation method defines how the rates determined from the rate table will be interpreted. The break weight calculation method compares and selects the lower rate from either the actual or lower end of the following rate range. With clipping, the system works through the pricing scale level by level. The calculation results from each scale level are then summarized to produce the overall result.

A charge type is the classification of a charge line that plays an important role in how the system calculates the transportation charges for the charge line, for example, a base rate, surcharge, or discount. A charge type can result in a positive or negative value for a charge line. You can also specify whether a charge type can be an amount or a percentage value.

Charge types can be grouped into charge categories. A useful code list is the UN/EDIFACT code list 5237. All three entities are freely definable in Customizing. You can use the charge subcategories of charge types to group and categorize charge types more granularly than charge categories. A suitable example is the code list resulting from UN/EDIFACT Recommendation 23: "FREIGHT COST CODE # FCC Harmonization of the Description of Freight Costs and Other Charges".

Charge categories and subcategories can be assigned in the charge type customizing activity and used to determine the service material during settlement.

When defining charge types, you can use the following settings:

• Specify whether a charge type can result in a positive or negative value.
• Specify whether a charge type can be an absolute or a percentage value.
• Specify whether you want to set the charge type as an absolute or a percentage value each time you assign the charge type.
• Assign a charge type to a charge category and charge subcategory.
• Indicate if the charge is a tax.
• Specify if and how the system rounds a value.
• Assign a default calculation base to the charge type so you do not need to assign a calculation base each time you create a calculation sheet line item.

Watch the simulation Explain a Calculation Sheet to learn about the structure and content of a calculation sheet.

You can maintain a large rate table, with or without scale items, using Microsoft Excel. You can enter the rates and scales into a Microsoft Excel file and upload the file to your TM system. Alternatively, you can define an empty reference rate table with validity periods in TM and download it to Microsoft Excel. You can then maintain the rate table in the Microsoft Excel file and upload it to your TM system.

Watch the simulation Work with Rate Tables to learn how to create rate tables and change rates using the Update Rate function and Excel download and upload.

A calculation base identifies the actual base or factor with which the system calculates the charges for the scale.

There can be various scenarios in which the system must calculate a charge for different weights, such as gross and net weights.

In this case, gross and net weights correspond to the scale base Weight, whose dimension is mass. However, by definition, gross weight and net weight are two entirely different charge aspects. Therefore, they have two different calculation bases, for example, "W1" for gross weight and "W2" for net weight.

To follow the scenario given here, you define a calculation base for every scale base. This calculation base is the final element in the charge determination. This means that the calculation base is used to determine the charges.

In the figure, Calculation Base, the charges depend on weight and the destination location. The scale has the scale base Location. This scale base defines the scale as using locations only. The scale base can be used for both the source and destination location. The calculation base DESTLOC determines the destination location of the freight order used. Technically, in customizing the calculation base, you define which field to use and which program or class the system will call to determine the field value.

If the resolution base in the calculation sheet points to the freight order stage, the system will derive the values from the specific stage and use them in the calculation.

Watch the simulation Explain Scales to learn more about scales.