Executing and Running Advanced Intercompany Sales (5D2)

A redesigned and more advanced version of the intercompany sales process is now available in the SAP S/4HANA Cloud system.

The best practices solution process Advanced Intercompany Sales (5D2) describes this process.

Intercompany sales order processing (scope item 1HO) has been available for a number of years. However, it has been identified as having a number of shortcomings, leading to the development of advanced intercompany sales (5D2).

This lesson initially summarizes the essential characteristics of the original solution and identifies some of its key shortcomings. Advanced intercompany sales processing is then introduced, and the framework used to control and orchestrate this process is briefly discussed.

The classical intercompany sales process, can be described in the following way:

In summary, a selling company sells materials to its customer. However, these materials are sourced, picked and delivered directly to the customer by an affiliated delivering company. The two companies are separate legal and financial entities, and may be located in different countries. In this example, the selling company is in Germany, while the delivering company is in the United States.

No intercompany purchase order is placed by the selling company on the delivering company. Nor is an intercompany sales order placed on the delivering company. It is therefore difficult to include intercompany sales in the delivering company's sales-related KPI reporting.

A customer invoice is created by the selling company. In addition, an intercompany invoice is sent from the delivering company to the selling company. This intercompany invoice can be posted automatically in the selling company. No supplier invoice can be posted in the selling company, since there is no purchase order to serve as the basis for this. Moreover, the intercompany invoice is based on an IDOC, which is outdated technology.

Another drawback in this classical intercompany sales process is that there is no valuated stock in transit available for the selling company. Consequently, goods leaving the US en route to the German customer may be owned by the German company, but are not visible as valuated stock in transit for this company.

A revised, more advanced version of the intercompany sales process is available, which alleviates the shortcomings of the classical intercompany sales process as discussed above.

This advanced version of the process can be described as follows:

Again, the process begins with a sales order placed by a customer on the selling company (in our example, the German company). The system then automatically creates a purchase order whereby the selling company orders the materials from the delivering company (in our example, the US company). A second sales order, in the form of an intercompany order, is then automatically created, based on the purchase order, and placed by the selling company on the delivering company.

The original sales order placed by the customer is referred to as sales order 2 (SO2). The purchase order from the selling company placed on the delivering company is referred to as purchase order 3 (PO3). The intercompany sales order placed on the delivering company is referred to as sales order 4 (SO4).

SO2 is the leading object, in which (in this example) a US plant is determined as the delivering plant. SO2 is also visible to MRP runs executed in the selling company. In addition, its items may be subject to (advanced) ATP checks.

For the customer sales order (SO2), a standard document type is used (such as OR). The purchase order placed by the selling company (PO3) uses a new purchase order type. The intercompany sales order in the delivering company (SO4) uses a new sales order type, item category and schedule line category. These are customized in such a way that there is no relevance for ATP, MRP, product compliance, trade compliance, transportation management and so on. Only the sales order placed by the customer on the selling company (SO2) is relevant for MRP and (advanced) ATP. The intercompany purchase order (PO3) and the intercompany sales order (SO4) are not visible to MRP.

Sales order 2 contains an additional field at item level called Transit Plant, which is used to record valuated stock in transit when control/ownership of the materials is transferred from the delivering company to the selling company. In our example, control/ownership of the materials is transferred from the US company to the German company, hence the Transit Plant is a plant located in Germany.

An outbound delivery is created in the delivering company, referencing the sales order in the selling company (SO2), which is always considered as the logistically leading object in this process.

After picking and packing, goods issue is posted in the delivering company, resulting in valuated stock in transit belonging to the delivering (US) company (see step 6 in the figure).

When control/ownership of the materials is transferred from the delivering company to the selling company, internal transfer of control information (date and time) is entered in the outbound delivery. This triggers the posting of a goods movement from valuated stock in transit belonging to the delivering (US) company to valuated stock in transit belonging to the selling (German) company (see steps 7, 7a and 7b in the figure).

Once the customer takes control/ownership, external transfer of control information (date and time) is entered in the outbound delivery. This triggers the posting of an additional goods issue, which reduces the valuated stock in transit belonging to the selling (German) company.

As soon as goods issue for the outbound delivery has been posted, an intercompany customer invoice can be created (A in the figure). This in turn triggers the creation of an intercompany supplier invoice (B in the figure), referencing purchase order 3 (PO3).

A new billing type is used for the intercompany customer invoice (A in the figure).

The additional steps PO3, SO4 and also the goods movements related to the valuated stock in transit (7, 7a, 7b and 8) are all automatically created/posted by the system. The goods movements are posted automatically as a result of entry of the transfer of control dates and times in the outbound delivery header.

Some key characteristics of this advanced version of the process include:

• Seamless end-to-end process that is highly automated and embedded into the following areas:
  • Product compliance
  • Trade compliance
  • SAP Transport Management (including freight costs)
  • Revenue recognition
  • Profitability reporting
  • Product costing
  • Group reporting/consolidation
• Changes in a customer-facing sales order are consistently applied by the system throughout the end-to-end document flow.
• Valuated stock in transit in the selling company, allowing for a seamless change of ownership/control between the participating companies, and subsequently to the customer
• A purchase order in the selling company enabling landed costs in product costing
• End-to-end monitoring and issue detection (and posting services)

Current features that this process supports are:

• Sell-from-stock items (Item category TAN)
• Free-of-charge items with invoice relevance (Item category CBXN)
• Batches with batch splits
• Serial numbers