Velasco, Andrei Ian

Sales and Distribution (SD) Overview

The SAP Sales and Distribution (SD) module helps organizations store and manage
customer and product-related data. It supports processes like sales, shipping, billing,
credit management, and foreign trade.

SD Organizational Structure (SAP SE, 2022)

SAP SD consists of various organizational units:

• Client – An independent environment within the system.

• Company Code – The smallest unit for financial reporting.
• Credit Control Area – Manages credit limits for customers across multiple
company codes.
• Sales Organization – Handles sales and legal liability for products and customer
claims.
• Distribution Channel – The method by which products/services reach customers
(wholesale, retail, direct sales).
• Division – Groups related materials, products, or services.
• Sales Area – A combination of Sales Organization, Distribution Channel, and
Division, determining pricing and sales conditions.
• Plant (Delivering Plant) – The facility responsible for delivering goods to customers.
• Other Units – Includes Shipping Point, Loading Point, Sales Office, Sales Group,
and Sales Person.

SD Master Data (SAP SE, 2022)

Three types of master data exist:
1. Customer Master Data

This master data contains all the necessary information for processing orders, deliveries,
invoices, and customer payments. Customers must have a master record, but one-time
customers can also be sufficient for occasional transactions.

• General Data – Information relevant to the entire organization, such as the client's
name and address.
• Company Code Data – Specific financial data assigned to the company, including
payment terms and bank details.
• Sales Area Data – Includes the Sales Office Currency and pricing conditions of the
sales organizations.

2. Material Master Data

This master data contains all the information that a company needs to manage about a
material. It is used by most components within the SAP system, such as Sales and
Distribution, Materials Management, Production, Plant Maintenance, Accounting and
Controlling, and Quality Management.

Material master data is stored in functional segments called Views, such as:

• General Information – Includes material details relevant to the entire organization,

such as material name, weight, and unit of measurement.
• Sales – Includes specific details on the Delivery Plant and Loading Group.
• Storage Location – Specifies stock-related information such as Stock Quantity.

3. Condition Master Data (Pricing Data)

This master data includes prices, surcharges (additional charges), discounts, freight
(goods transportation costs), and taxes.

• Pricing Conditions can be dependent on various factors, such as material-specific

and customer-specific data, and can also be based on any document field.
• An output is information sent to the customer using various media such as email,
mail, fax, and Electronic Data Interchange (EDI)
• Output Types define how pricing and other information should be transmitted,
using methods such as email, mail, fax, or Electronic Data Interchange (EDI).
 • Examples of output types in SD processing include order confirmations, freight
lists, and invoices.

SD Processes (SAP SE, 2022)

The Order-to-Cash Process consists of:

1. Pre-sales Activities

• The Sales Support component of SD assists the process of sales, distribution,

and marketing of companies and their products and services to customers.
• Pre-sales Activities fulfill the following functionalities:
o Creating and tracking customer contacts and communications (sales
activity).
o Implementing and tracking direct mailing, Internet, and trade fair
campaigns based on customer attributes.
• All pre-sales activities aim to equip the sales technician with all the
information necessary to negotiate and complete the potential sale. This
information includes:
o Past sales activity
o Past communication
o Contact information
o General company information
o Credit limits and usage
o Current backorders
• Pre-sales activities include documents such as inquiries and quotations.
o Inquiry – A customer’s request for information or a quotation concerning
products or services, without any obligation to purchase.
o Quotation – A legally binding offer to deliver specific products or services at
a predefined price within a specific timeframe.

2. Sales Order Entry

• Sales order processing can originate from various documents and activities such as
customer calls, emails, contracts, and quotations.
• The electronic document created for a sales order entry should contain:
 o Customer information
o Material/Service and quantity
o Pricing (conditions)
o Specific delivery dates and quantities
o Shipping information
o Billing information
• The sales document consists of three (3) primary areas:
o Header – Contains data relevant to the sales order, such as customer data
and total order cost.
o Line Item(s) – Information about specific products, including material,
quantity, and cost.
o Schedule Line(s) – Delivery quantities and dates for partial deliveries.
• Additional key elements in Sales Order Entry:
o Delivery Schedule – When an order is created, a requested delivery date
must be entered, and the system determines availability based on
predefined scheduling rules.
o Shipping Point & Route Determination – The system determines the
shipping point and delivery route.
o Pricing – The system automatically calculates prices, discounts,
surcharges, taxes, and freight.
o Header pricing is valid for the whole order, and it is the cumulative of all line
items within the order, while line item pricing is for each specific material.
o Credit Limit Check – Ensures the company manages its credit exposure and
risk for each customer, blocking orders and deliveries if necessary.

3. Availability Check

• Determines the material availability date by considering all inward and outward
inventory movements.
• Three (3) proposed delivery methods:
o One-time delivery
o Complete delivery
o Delayed proposal

4. Shipping & Transportation

• The shipping process begins when the delivery document is created for the sales
order.
 • The delivery creation process checks whether a delivery is possible and whether
any delivery blocks exist.
• Factors involved in delivery creation:
o Availability confirmation
o Total weight and volume determination
o Packing proposal generation
o Scheduling checking
o Partial deliveries consideration
o Route assignment update
o Picking location assignment
o Sales order update
o Batches determination
o Quality checking
5. Picking – Ensures correct material selection based on the delivery note, considering:
o Assigned date for picking start
o Automated storage location assignment
o Serial/lot number tracking & batch management
o Warehouse Management integration
6. Packing – Identifies packaging for products and updates returnable packaging
accounts.
o Tracks packed products by container
o Ensures weight/volume restrictions are met
o Assigns packed items to required transportation

7. Goods Issue

• Marks a legal change in ownership of products, depending on Incoterms and the

sales order terms and conditions.
• Also indicates that goods have left the seller's premises.

8. Billing

• Generates the customer invoice and updates the customer’s credit status.
• The billing document is created by copying data from the sales order and/or
delivery document.
• Billing document types:
o Order-based billing
o Delivery-based billing
 • Billing methods:
o Delivery-based invoicing
o Collective invoicing
o Split invoicing
• Automatically creates a debit posting to the customer’s sub-ledger account and a
credit posting to the company’s revenue account.

9. Payment

• The final step in the sales order process, managed by Financial Accounting.
• Payment posting clears liabilities in Accounts Receivable (AR) and increases the
company’s bank account balance.
• Includes posting payments against invoices and reconciling differences.

10. Document Flow

• The document flow and order status feature in SAP can be used to find the status
of an order at any point in time.
• SAP updates the order status whenever a change is made to any document in the
Order-to-Cash process.

Materials Management (MM) Overview

The SAP Materials Management (MM) module supports material management,
inventory, and warehouse management in the supply chain process and covers
consumption-based planning, planning, vendor evaluation, and invoice verification.

MM Organizational Structure (SAP SE, 2022)

The MM organizational structure is divided into:

Materials Management Organizational Units

• Client – An independent environment in the system.

 • Company Code – The smallest unit where a legal set of books is maintained.
• Plant (Delivering Plant) – A company’s operating area or branch for
manufacturing, distribution, purchasing, or maintenance.
• Storage Location – A unit that differentiates various material stocks in a plant.

Purchasing Organizational Units

• Purchasing Organization – The buying activity unit responsible for material

procurement and vendor negotiations.
• Purchasing Group – Represents buyers responsible for purchasing activities and
serves as the communication channel for vendors.

MM Master Data (SAP SE, 2022)

The MM master data consists of:

Vendor Master Data

Contains all necessary information for business activities with external suppliers. Used
and maintained by Purchasing and Accounting.

• Client Level – Includes vendor address, vendor number, and preferred

communication.
• Company Code Data – Includes reconciliation account, terms of payment, and
bank account.
• Purchase Org Data – Includes purchasing currency, salesman’s name, and
vendor partners.

Material Master Data

Contains all the information needed to manage a material. The MM Material Master is the
same as the SD Material Master and is used across multiple SAP components.

• General Information – Includes material name, weight, and unit of

measurement.
• Sales – Includes Delivery Plant and Loading Group.
• Storage Location – Contains stock quantity information.
Purchasing Information Record

This data allows buyers to quickly determine which vendors have offered or supplied
specific materials. It serves as the default information for Purchase Orders and defines
the relationship between a vendor and a material.

• Data on pricing and conditions

• Last purchase order
• Tolerance limits for delivery
• Specific lead times
• Availability periods
• Vendor Evaluation data

MM Processes (SAP SE, 2022)

The Procure-to-Pay process consists of:

Purchase Requisition

An internal document instructing the purchasing department to request a specific good

or service.

• Created in two ways:

o Direct (Manual): The requester determines what, how much, and when.
o Indirect (Automatic): Created through Materials Request Planning (MRP),
Production Order, Maintenance Order, or Sales Order.

Requisition Sourcing

Once assigned to a Source of Supply, the requisition can be released for processing.

• Internal Sourcing Requirements – A plant within the company can act as a

supply source. If so, an internal procurement transaction (stock transport
order) is created.
• Source List – A record that specifies the allowed means for procuring material
for a given period.
o If only one vendor exists, the system assigns it automatically.
 o If multiple vendors exist, the system displays the list of options.
o If no source is available, the system searches information records and
outline agreements.

• Outline Agreements - Requisitions can be fulfilled through existing long-term

purchasing agreements, which are divided into:

• Contracts – Defines the individual materials, material groups, or services

with prices and quantities.

• Scheduling Agreements – Distributes the total amount of material over a

certain period in a delivery schedule with line items specifying quantities
and planned delivery dates.

Request for Quotation (RFQ)

A Purchasing Organization’s invitation for vendors to submit a bid for supplying

materials or services.

• RFQ Process:
o Accepted quotations generate Purchasing Information Records.
o Perform Quotation Price Comparisons.
o Select a Quotation.
• Quotation for Vendor:
o A legally binding offer submitted by the vendor in response to an RFQ.
o Contains prices and conditions for materials within a predefined period.
o The RFQ and Vendor’s Quotation become a single document in SAP.

Vendor Evaluation

Helps purchasing evaluate vendors for sourcing and monitor vendor relations using
performance scores and criteria.

• Supports up to 99 main criteria and 20 sub-criteria.

• Key evaluation criteria:
o Price: Includes Price Level and Price History.
 o Quality: Based on Goods Receipt, Quality Audit, and
Complaints/Rejection Levels.
o Delivery: Includes On-Time Delivery, Quantity Reliability, Compliance
with Shipping Instructions, and Confirmation Dates.

Purchase Order (PO)

A formal request sent to a vendor for a specific material or service under predefined
conditions.

• Can be created manually or automatically.

• PO Types:
o Standard
o Services
o Subcontracting
o Third-Party
o Consignment
• Generated documents from a PO:
o Purchase Order Output
o Order Acknowledgment Forms
o Reminders
o Schedule Agreements

Goods Receipt

Represents the goods movement when materials are accepted into the system.

• Movement Types:
o 101 – Goods receipt into warehouse stock.
o 103 – Goods receipt into Goods Receipt blocked stock.
o 122 – Return to vendor.
o 231 – Consumption for a sales order.
o 561 – Initial stock entry.
• System updates after Goods Receipt:
o Material Document created.
o Accounting Document created.
 o Stock Quantities & Values updated.
o Purchase Order updated.
o Goods Receipt slip or pallet label generated.

Goods Receipt

Represents the goods movement when materials are accepted into the system.

• Movement Types:
o 101 – Goods receipt into warehouse stock.
o 103 – Goods receipt into Goods Receipt blocked stock.
o 122 – Return to delivery vendor.
o 231 – Consumption for a sales order.
o 561 – Initial stock entry.
• System updates after Goods Receipt:
o Material Document created.
o Accounting Document created.
o Stock Quantities & Values updated.
o Purchase Order updated.
o Goods Receipt slip or pallet label generated.

Invoice Processing

Invoices are matched against the Purchase Order to verify content, prices, and
calculations. If discrepancies exist, the system generates a warning or error and may
block the invoice based on system settings.

When an invoice is saved:

• Liability from the Goods Receipt is applied to the Vendor.

• The Purchase Order and Material Master are updated.
• A Financial Accounting document is created.

Once posted, the invoice is verified, completing the process, and initiating payment
within Financial Accounting.
Payment to Vendor

Payments can be processed automatically (post outgoing payment) or manually

(payment program). A financial accounting document is created to record the
transaction.

Elements of the Payment Transaction:

• Payment Method
• Bank from which payment is made
• Items to be paid
• Calculation of payment amount
• Printing of payment medium