Determining Item Categories in SAP SD: A Comprehensive Guide

Item Category Determination In Sap Sd

Item Category Determination in SAP SD is a crucial process that plays a vital role in the sales and distribution module of the SAP system. It involves determining the appropriate item category for each product or service being sold, based on various factors such as material type, industry-specific requirements, and customer preferences. This article will delve into the importance of item category determination in SAP SD and provide insights into how it can be effectively managed to streamline sales processes and enhance customer satisfaction.

Determining Item Categories in SAP SD

The following parameters are important for the business data.

Determining Item Category in SAP SD

The purpose of this field is to categorize the item in a way that allows the system to perform only relevant functions. It enables you to indicate whether the item is a material, text, value item, or packaging. For example, text items do not undergo weight calculations or pricing processes.

Completion Rule

The item category determination in SAP SD is responsible for determining the condition that must be satisfied to indicate that an item has been completed in a sales document. For example, if value B is chosen, the item will be considered complete once the entire quantity has been referenced. The completion rule can only be applied if the Update Document Flow field is selected at the item level during copy control from one sales document to another. There are various values available for this field.

– Not applicable for fulfillment.

– A: Item is marked as completed with the initial reference.

– B: Item is considered complete only when the entire quantity has been referenced.

– C: Item is deemed complete once the target quantity has been fully referenced.


This field determines whether pricing needs to be performed for the item. There are four available choices for this:

Schedule Line Authorization in SAP SD

If the checkbox is chosen, it allows for the creation of schedule lines for the item. It is recommended to select this option if the item category is important for delivery purposes.

Credit Active

If chosen, the item is considered important for credit management operations and its value will be included in the overall liability calculation.

Item Classification in SAP SD

The item category determination in SAP SD includes a field that allows for variations in business data between the header and item levels. By selecting this option, users can enter different payment terms at the header and item levels, such as 30 days at the header level and 60 days at the item level.

Incompletion Proced. (Incompletion Procedure)

This field specifies the fields that are included in the incompletion log, meaning that these fields must be filled out for the item to be considered complete.

Procedure for Determining Partners

The configuration in this field defines the partner functions that are permitted and required for each item.

Automatic Creation of Purchase Orders

If the checkbox is chosen, the system will generate a purchase requisition and a purchase order (PO) automatically when the sales document is saved for third-party schedule lines.

Structure Scope

This field in SAP SD determines the processing of a Bill of Materials (BOM) in a sales document. It allows you to define whether the material structure should be expanded or not, and if it is expanded, whether only the first level needs to be expanded or if a multilevel expansion should be performed.

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Determining the Category of an Item: Guidelines for India

The item category in SAP SD is a classification that the system assigns to each product or service in a sales document. This classification helps determine how the item will be processed and what actions can be performed on it.

The system automatically determines the item category based on several factors. First, it considers the type of sales document being created, such as an order or a delivery. Then, it looks at the item category group assigned to the material being sold. This group categorizes materials based on their characteristics and helps define how they should be handled.

Additionally, the higher-level item category plays a role in determining the item category for individual items within a sales document. The higher-level item category represents a grouping of related items and influences how they are treated together.

Lastly, the usage of an item category also affects its determination. The usage refers to whether an item is used for normal sales processing or special purposes like returns or free goods.

Shipping Data

Below are the important factors to consider when determining shipping data.

Determining Item Category for Delivery in SAP SD

If the checkbox is chosen, it indicates that the text or value item should be included in the delivery. In previous examples, it was mentioned that standard items relevant for delivery (such as item category TAN) do not require this selection. This field specifically pertains to value or text items (item types A and B).

Weight/Volume Relevance in Item Category Determination

If chosen, the system calculates the weight and dimensions of the item.

Delivery Group Creation in SAP SD

The item category determination in SAP SD includes a field that determines whether the subitems of an exploded BOM in a sales document should be delivered together. There are three available options for this determination.

Understanding the SAP SD Item Category

For instance, when selecting the frame component in your costing structure, you might choose the “Frame” item category from the dropdown menu. By doing so, you unlock specific fields where you can enter relevant details like frame dimensions or materials used.

Similarly, if we take another component like wheels and select its corresponding “Wheel” item category from the dropdown menu while setting up our costing structure, it will enable us to input additional data related to wheel size or type (e.g., mountain bike vs road bike).

Billing Data

Below are the important factors to consider when determining billing data.

Billing Relevance

The item category determination in SAP SD includes a field that indicates if the item should be considered for billing and the criteria for billing. There are over 20 options available in this dropdown list, but we will only discuss some of the frequently used values.

Cost Determination in SAP SD

If chosen, the system calculates the price of the sales document item.

Statistical Value

The item category determination in SAP SD includes a field that determines if the item value is considered when calculating the overall order value. There are three available options for this field.

The system transfers the item value to the header totals. Option X indicates that there is no accumulation and the item value cannot be used for statistical purposes. On the other hand, option Y also does not allow accumulation but permits the item value to be utilized statistically.

Billing Block

When a billing block is chosen, the system will automatically apply the billing block to the specific item. This means that no billing document can be generated until the sales document item has been reviewed and the billing block has been removed.


The field signifies if the item is a return or not.

The item category is automatically determined by the system based on the sales document type, the item category group of the material, the higher-level item category, and the usage of the item category. Most of the time, a user won’t need to worry about the item category. However, in some cases, the item category can be changed manually in the sales document item to deviate from the default business transaction.

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The process of determining item categories in SAP SD involves assigning them to sales document types and item category groups. Additionally, you can specify the usage and higher-level item category as required. SAP S/4HANA offers a range of pre-defined item category groups that cater to common business scenarios, but it also allows for the creation of custom ones if necessary. The table provided below showcases some key item category groups available in the standard system.

In the case of materials available in stock, it is typical to assign the item category group NORM. On the other hand, for services and nonstock materials that need to be delivered, the item category group DIEN is usually assigned.

The usage of item categories is also important in determining the appropriate item category and influencing how the system responds to specific situations. For example, it can handle scenarios such as batch splitting or when dealing with text items. If the predefined options do not meet your needs, you have the option to create a new item category usage. However, keep in mind that an item category usage is only applicable in certain circumstances. The following table provides some common values defined within the standard system to demonstrate how the item category usage plays a significant role in determining item categories under various special circumstances.

After assigning the default item category, the system allows for manual entry of alternative item categories that can override the proposed value. These alternate categories are referred to as manual item categories. In a straightforward scenario where the sales item does not involve subitems or special cases utilizing specific item category usage, the determination of the appropriate item category follows a logical process. The diagram below illustrates this logic.

Once you have grasped the process of how the system determines the item category in a sales document, it is worth examining this diagram that displays a portion of the real customizing table where default and manual item categories are allocated.

According to the top configuration entry shown, if a material with item category group NORM is entered on a sales document type OR and this material is neither a subitem nor a special case, the system will propose item category TAN, which is the item category maintained in the DfItC (default item category) column, where both the Usge (usage) and HLevItCa (higher-level item category) fields are blank. However, business users have the option to manually change the item category to TAP, TAQ, or TANN. Any other item categories are not allowed in this particular case. You should note that all the other configuration entries shown above are only relevant for subitems, since the HLevItCa column contains the item category of the parent item.

In SAP S/4HANA, it is possible to manually add subitems or create a sales BOM within a sales document. The system will automatically generate the corresponding subitems for you. A subitem is always associated with a parent item and can be identified by referring to the higher-level item field of the child item. To illustrate, consider a sales document with three items: 10 (parent), 20 (subitem), and 30 (subitem).

If we consider the item category group for materials MAT1, MAT2, and MAT3 as NORM, and the sales document type as OR, the example mentioned above aligns with the assignments displayed in Figure 4.5. For item 10, the system determines item category TAN (the first entry from the top in the assignment table), while items 20 and 30 are proposed to have item category TANN (the fourth configuration entry from the bottom).

Another crucial customization task associated with item categories involves activating advanced logic to automatically decline sales order items that involve third-party delivery or individual procurement. By selecting the Enhanced Rejection Logic checkbox and choosing an option from the Auto Reject SO Item dropdown list, you can enable automatic rejection and specify a reason for the rejection of sales order items. This rejection reason will be applied automatically when either the Delivery Complete or Final Invoice indicator is set in the corresponding purchase order item.

An illustration can be provided to understand the functioning of the automatic rejection feature in SAP S/4HANA. Suppose you generate a sales document and choose the item category CB1 for 50 units, which is meant for third-party delivery. As a result, a purchase order (PO) is automatically created by the system for these 50 units and sent to the vendor.

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The supplier has a limited stock of 45 units and will not produce any more as the product is no longer being made. Once the buyer receives all 45 units, they mark the purchase order item as “Delivery Complete”.

If the enhanced rejection logic and automatic sales order update from PO features are enabled in customizing, as demonstrated earlier, for item category CB1, the system will automatically assign the chosen reason for rejection to the sales document item. Consequently, even if only 45 units out of 50 have been delivered, the sales order item will be labeled as closed and will not appear in backorder reports.

Note: You can enable automatic rejection and select a reason for rejection only for item categories involving third-party delivery. For example, the automatic rejection works with item category CB1 (third-party delivery), but it cannot be activated for item category TAB (individual procurement).

Editor’s note : This post has been adapted from a section of the book SAP S/4HANA Sales Certification Guide: Application Associate Exam by Darío Franco and Jon Simmonds.

The T code for determining item category in SAP

The transaction code to define item categories in SAP SD is VOV7. To access this, you need to enter the Tcode VOV7 in the Command Bar. In this section, you will find a list of both SAP-defined and user-defined item categories. There is also a button available for creating new item categories.

In order to define item categories in SAP SD, you can use the transaction code VOV7. Simply enter this code into the Command Bar and it will take you to the relevant screen where you can manage your item categories. This screen provides a comprehensive list of all existing item categories, including those defined by SAP as well as any custom ones created by users.

To create a new item category, simply click on the designated button provided within this screen. By doing so, you will be able to specify various attributes and settings for your newly created category according to your specific business requirements.

Checking material category for items in SAP

The item category in SAP SD is determined based on several factors, including the sales order type, item category group, usage, and high-level item category. To configure this in SAP, you can navigate to SPRO > SD > Sales > Sales Document > Sales Item Level and assign the appropriate item categories.

In order to have more flexibility in determining the item category for your sales document type, you can maintain two different item categories: one as a default option and another as a manual selection. This allows you to choose between these options depending on your specific requirements.

Item categories play a crucial role in defining how items are processed within the sales process. They determine various aspects such as pricing procedures, availability checks, delivery schedules, and billing relevance for each individual product or service being sold.

By properly configuring and assigning the correct item categories in SAP SD, businesses can streamline their sales processes and ensure accurate handling of products or services from order creation to final invoicing.

Determining the item category group in a sales order

1. Sales Document Type: Different types of sales documents (e.g., inquiry, quotation, order) have specific rules for determining the appropriate item category.

2. Item Usage: Each material or service can be assigned an item usage which helps determine its corresponding item category.

3. Item Category Group: Materials are classified into different groups based on their characteristics and requirements. The assigned group influences the selection of suitable item categories.

4. Higher Level Item: In case of sub-items or components within a main product structure, the higher-level items play a role in determining their respective categories.

By considering these factors and customizing the relevant settings in SAP SD system configuration, businesses can ensure accurate and consistent determination of appropriate item categories for their sales orders.