Managing Freight Agreements

To calculate charges for a freight order or freight booking and distribute those charges among delivery items, you must maintain master data, including freight agreements.

Watch the following video to learn more about freight agreements.

Freight agreements are managed using the Manage Freight Agreements app. This app allows you to create and edit freight agreements, which are essential for calculating the transportation charges payable to your carriers. These agreements, combined with calculation sheets, rates, and scales, help you efficiently manage long-term contracts with carriers. With the Manage Freight Agreements app, you can:

• Create freight agreements: Include contractual data such as validity dates, charge lines, and rates.
• Copy existing freight agreements: Duplicate agreements along with their calculation sheets, rates, and scales.
• Display and edit freight agreement details: Modify items like calculation sheets, rates, scales, and calculation rules.
• Add and edit large volumes of rates: Use Microsoft Excel for bulk rate updates.
• Use rate tables: Incorporate rate tables into freight agreements rather than creating them locally.
• Release freight agreements: Make agreements available for use in freight orders to calculate charges.
• Edit released freight agreements: This feature is available only to super users.
• Delete freight agreements: Remove agreements that are still in process.
• Display freight order details: View and access details of freight orders in released agreements.

At the header level of a freight agreement, you manage fundamental information, such as the:

• Purchasing organization
• Carrier
• Validity period (start/end dates)
• Document currency
• General terms, including main transportation mode and shipping type

The calculation sheet is used to determine transportation charges. It combines the allowed charge types for a document and specifies the order in which these charges are considered during the calculation.

Here's how it works:

• The calculation sheet defines which transportation charges to calculate and how to calculate them.
• It helps in paying suppliers or carriers for subcontracted transportation services.
• The sheet includes various calculation sheet items, each of which can result in a calculated amount.

By using the calculation sheet, the system ensures a structured and accurate calculation of transportation charges. Each calculation sheet item can consist of the following:

• Charge type
• Rate (either flat rate, local rate table or referenced rate table)

  Rates contain details of the rate table for each calculation sheet item. You can also enter fixed rates or percentages of other lines in the calculation sheet.

• Calculation resolution base (root, product, or stage)

  When calculating charges, the system determines the calculation resolution base by the origin of the data on which the charge aspect is based. You can define the charge aspect for the resolution base as:

  • Root: This is the header of the freight order.

  • Stage: To use stage attributes such as distance between the locations visited on a tour.

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

    For example, suppose you want to determine the freight rate based on the gross weight of the freight order. To do this, you'd use the calculation resolution base of root. To calculate the freight on a per product basis, you'd use the product calculation resolution base.

• Calculation method (for example, standard, or breakweight)
• Rounding profile
• Reference item (for relative calculation sheet items)

Watch the simulation How to Create a Freight Agreement for Carrier Invoicing to learn more about the system-related activities.

Watch the simulation Manage Rate Tables to learn more about the system-related activities.

In the area of transportation charge management, there are four areas for business process configuration. These allow you to define charge types, charge profiles, calculation profiles, and dimensional weight profiles.

1. Define Charge Profiles

   The charges profile allows you to define the general settings for charge calculation. Here you can assign a calculation profile and a distribution profile. The distribution profile defines whether you want the freight cost distributed to order/delivery items by gross weight, net weight, gross volume, or distance times weight.

2. Define Calculation Profiles

   You can assign a calculation profile to an organizational unit via the charges profile. You can define the following settings when you create or edit a calculation profile:

   • The calculation date type that the system uses as the basis for the rate and agreement validity determination during charge calculation
   • The exchange rate date type that the system uses as the basis for the exchange rate determination during charge calculation
   • The currency exchange rate type that the system uses as the basis of the currency exchange rate conversion
   • The calculation level that the system uses to determine at which level to calculate the charges, for example, at header level
3. Define Charge Types

   You can create or edit charge types that are used to calculate transportation charges. Assigning a charge type to a calculation sheet line item or a rate table plays an important role in how the system calculates the transportation charges for that line. When you define charge types, you can make 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 value or a percentage value.
   • Maintain its description (in different languages) in the Maintain Charge Type Descriptions section of the configuration activity.
   • Assign a transportation mode and shipping type to the charge type.

   The charge type is also relevant in the settlement process. It is the basis for the mapping of transportation charges to services when creating the service purchase order in the settlement process. You can use the Create and Update Service Products - From Charge Types app to automatically create the corresponding configuration/mapping.

4. Define Dimensional Weight Profiles

   The system uses dimensional weight profiles to determine transportation charges. You calculate the dimensional weight by converting the volume to the appropriate unit of measure and then dividing it by the dimensional weight factor. The result is the weight in the target unit of measure. The dimensional weight is then used in the charge calculation using the corresponding calculation base.

You can calculate the charges for transporting goods in freight orders or freight bookings based on the rates that you maintain in a rate table, or locally in a freight agreement. A prerequisite for charge calculation in a freight order or a freight booking is a valid, released freight agreement between the purchasing organization and carrier with rates for each calculation sheet item.

The system determines the relevant freight agreement based on the business partner (carrier) and purchasing organization. The calculation date must be within the validity period of the freight agreement.

The freight order contains the logistical data on which the charges are based, such as source location, destination location, item information, and quantities.

The system determines the transportation charges and rates agreed based on logistical data from the calculation sheet items, rates, and scales of the freight agreement. The following information may be used:

1. Agreement validity period

   The freight agreement must be valid and released for the system to calculate the transportation charges.

2. Rate table validity period

   If you are using a rate table, the relevant validity period must be released in the rate table for the system to calculate the transportation charges.

3. Calculation date

   The system uses the date, for example, order date or start of main stage, as the basis for the rate, exchange rate, agreement validity, and ultimately the charge calculation based on what was defined in the relevant calculation profile.

4. Calculation sheet items

   Calculation sheet items are used to specify which transportation charges are calculated and how they are calculated. Each calculation sheet item can result in a calculated amount.

5. Rates

   The system determines the most appropriate rate when calculating transportation charges, based on certain criteria and attributes in the freight order / freight booking and freight agreement.

6. Document currency

   The charges are calculated in the document currency.

The system calculates transportation charges automatically for freight orders when you transfer the freight orders from a decentral transportation management system to Transportation Management (TM) in SAP S/4HANA Cloud Public Edition or when the freight order is updated (internal transportation planning). For example, if the source business document (sales order) is changed, this results in a change of the freight unit and ultimately in a change to the freight order, either through an update from the decentral transportation management system or from internal planning. You can also manually trigger the calculation of transportation charges in the Manage Freight Orders app.

The freight order can have the following charge calculation statuses:

• Calculated - Charge calculation was successful for the freight order.

• Calculation Error - Data is missing or incorrect, for example, the freight agreement is missing from the freight order or the local currency is missing from the freight agreement.

• Not Calculated - No freight agreement could be determined, for example, because the carrier is missing in the freight order.

You can access charge calculation details on the Charges tab of freight orders / freight bookings in the Manage Freight Orders and Manage Freight Bookings app. The Charges tab contains general charge data and also details of each charge line, for example, the charge type, rate, exchange rate, and calculated amount.

When determining the rates, the system considers the following:

• Calculation method

  When calculating a rate during charge calculation, the system applies a standard, clipping, or breakweight calculation method to calculate the charges for the charge type.

  An example of this is shown in the following table:

  Rate Table for Illustration of Different Calculation Methods

  Gross Weight	Rate
  Up to 100kg	2.00 EUR/kg
  Up to 200kg	1.80 EUR/kg
  Up to 500kg	1.50 EUR/kg

  The Standard calculation method takes the gross weight and uses the rate for the individual scale item for its calculation:

  • Gross weight: 95 kg ==> 95 kg * 2,00 EUR/kg = 190 EUR
  • Gross weight: 110 kg ==> 110 kg * 1,80 EUR/kg = 198 EUR

  This example illustrates the downside of the Standard calculation method, that higher weights may yield lower prices. The Clipping and Breakweight calculation methods avoid this effect as follows.

  The Clipping calculation method takes the incremental gross weight for each scale item and uses the rate for the individual scale item for its calculation:

  • Gross weight: 95 kg ==> 95 kg * 2,00 EUR/kg = 190 EUR
  • Gross weight: 110 kg ==> 100 kg * 2,00 EUR/kg + 10 kg * 1,80 EUR/kg = 218 EUR

  The Breakweight calculation method compares the entry price of the subsequent scale item according to the Standard calculation method, and the standard price for the actual weight and chooses the minimum:

  • Gross weight: 95 kg ==> 95 kg * 2,00 EUR/kg = 190 EUR OR 100 kg * 1,80 EUR/kg = 180 EUR ==> Minimum is 180 EUR
  • Gross weight: 110 kg ==> 110 kg * 1,80 EUR/kg = 198 EUR OR 200 kg * 1,50 EUR/kg = 300 EUR ==> Minimum is 198 EUR

  The Fuel Surcharge Calculation method allows you to calculate fuel surcharges based on two different models. Fuel Surcharge Calculation Model 1 is widely used in North America. With this model, you calculate the fuel surcharge based on the fuel surcharge index based on the origin location or zones. To calculate the fuel surcharge, you must maintain two rate tables:

  • A rate table with the fuel surcharge rates for the corresponding fuel surcharge values.
  • A rate table with the location, dates or validity, and the respective fuel surcharge values. You use this rate table as the index base rate table.

  In Fuel Surcharge Calculation Model 2, the logistic service provider or carrier agrees with the customer on an index base date based on which the system determines the base fuel surcharge value. The actual fuel surcharge is calculated based on the current fuel surcharge value and base fuel surcharge value. To calculate the fuel surcharge, you define an index base rate table with the fuel surcharge values for specific calculation dates or validities. You can also define a rate table with the fuel surcharge values for scale items such as location and calculation dates or validity periods.

• Resolution base

  The system calculates the charges based on the resolution base, which is as follows:

  • PRODUCT- Products being transported

  • ROOT- Freight order or freight booking

  • STAGE- Transportation stage

• Scales

  Scales are used to define a parameter, which then defines a rate. For example, if a rate depends upon distance and weight, you define a separate scale for distance and weight. The distance and weight scales are then used to define the rate.

• Calculation base

  The system calculates charges for a scale based on the calculation base, for example, gross weight, net volume, or destination location. A calculation base corresponds to an underlying scale base. A scale base is generic, but a calculation base is more specific. For example, there is a scale base for weight and calculation bases for gross weight, net weight, and dimensional weight. Therefore, you use a calculation base to allow the system to calculate a charge for different kinds of factors, such as weight, volume, and distance.

• Charge type

  The charge type helps you to determine how the system calculates the transportation charges for the charge line. The charge type also determines the type of value (absolute or percentage) that you can enter for a calculation sheet item. A charge type can result in a positive or negative value for a charge line.

• Flat rates, relative rates, or percentages

  • Specify a flat rate for a calculation sheet item by entering an amount and a valid currency.

  • Specify a relative rate for a calculation sheet line item by specifying a calculation rule and the rates.

    Note

    Only one calculation rule can be specified at the line-item level and you must specify the calculation rule if you have a relative calculation base as a scale.

  • You can specify that a calculation sheet item is a percentage of another calculation sheet item by entering a percentage value (%) as the currency, and a reference line number or a range of reference lines.

• Minimum and maximum amounts

  You can specify a minimum or maximum amount for specific charges in the local calculation sheet of freight agreements. Then, during charge calculation, the system compares the calculated charge to the minimum or maximum amount. If the calculated charge is higher or lower than the minimum or maximum amount, the system charges the minimum or maximum value instead.

  Note

  You can specify the minimum and maximum amounts only for scales with the Same Scale scale type and a relative calculation type.

You can monitor freight orders that have calculation errors with the Monitor Calculation Errors - Freight Orders app. You can also use the app to calculate the charges, which helps to analyze the errors. When you complete these tasks, you can resolve the errors in the relevant app (for example, specifying a rate that is missing for a mandatory charge in the Manage Freight Agreements app or the Manage Rate Tables app) so that the freight orders can be included in financial postings.