Understanding the Third Party Process in SAP SD

Third Party Process In Sap Sd

As an SAP S/4HANA SD consultant, I will discuss the Third Party Sales process in the SAP S/4HANA system in this blog.

INTRODUCTION:

Let’s start with a brief explanation of the “third party sales” process’s capabilities.

PROCESS FLOW:

To facilitate third-party processing, SAP provides the TAS item category and CS schedule line category. The CS schedule line category includes default settings for the purchase requisition type, item category, and account assignment. It is responsible for initiating the purchase requisition for the order line items. On the other hand, the TAS item category has billing relevance F, indicating that billing can only occur once the invoice receipt for the purchase order is recorded.

To create a third-party material in the SAP SD module, you need to use item category Group BANS in the MM01 transaction. When manually creating a purchase order, there is no option for automatic creation indicated by TAS. However, if you choose to automatically create a purchase order, you can utilize item category ALES and set the indicator for automatic PO creation within it. Additionally, make sure to allocate the purchase information to the relevant sales organization in SPRO.

Once this is done, proceed to create a sales order using order type OR in VA01. To view the Purchase Requisition Number associated with this sale order, open it in VA03 and navigate to the Schedule Line Tab where you will find the PR number displayed.

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Finally, convert the generated purchase requisition into a purchase order using ME21n transaction.

Invoice Receipt Process in SAP SD

The business receives a bill from the vendor and needs to approve it. The invoice receipt is important for verifying the invoice. Using T code MIRO, the system validates the invoice based on the purchase order, checking details such as received amount and prices.

Third Party Billing in SAP SD

In the context of SAP SD, third-party processing refers to a scenario where a company places a purchase order with a vendor to deliver goods or provide services directly to a third party, such as a customer. Unlike traditional sales processes where the company itself delivers the material, in third-party processing, the company acts as an intermediary between the vendor and the end customer.

This process begins when the company receives an order from its customer. Instead of fulfilling this order using its own inventory or production capabilities, it creates a purchase requisition for the required items and sends it to its designated vendor. The vendor then fulfills this request by delivering the goods directly to the end customer on behalf of the company.

The SAP TAS Process: An Overview

In this process, when the vendor sends the materials, they invoice us for those items through MIRO transaction in SAP. We then receive and verify their invoice against our purchase order and goods receipt information. Once we have confirmed and approved their invoice, we proceed with making payment to the vendor.

Simultaneously, based on the quantity of materials delivered by the vendor to our customer, we create an invoice for our customer using VF01 transaction in SAP SD module. This way, we pass on both product cost and any additional charges or markups incurred during this third-party process.

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1. Vendor delivers materials directly to customers on behalf of our company.

2. Vendor invoices us for these delivered items through MIRO transaction.

3. We verify and approve their invoice before making payment.

4. Based on quantity delivered by vendors, we create an invoice for customers using VF01 transaction in SAP SD module.

5. Our customer receives an invoice from us which includes product cost along with any additional charges or markups incurred during this third-party process.

The various procedures in SAP SD

In SAP SD, the user manages various types of master data and tracks all transactions associated with it. The sales and distribution master data comprises the following:

1. Customer Master Data: This includes information about customers such as their names, addresses, contact details, payment terms, and credit limits.

2. Material Master Data: It contains details about the products or materials being sold, including their descriptions, prices, units of measure, stock availability, and other relevant attributes.

3. Pricing Conditions Record: This record consists of pricing conditions for different customer groups or specific agreements. It includes information on discounts, surcharges, taxes applicable to each product or service.

By effectively managing these master data elements in SAP SD system along with tracking transactions accurately ensures smooth sales and distribution processes within an organization.

All the processes in SAP SD

Step 1: Sales Inquiry

P.S. In India, this step plays a crucial role in ensuring effective communication between customers and businesses. By accurately recording and addressing customer inquiries through the sales inquiry process, companies can enhance their responsiveness and provide tailored solutions to meet specific demands.

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Step 2: Quotation

Can you provide an instance of a third party procedure?

To comprehend the concept of third-party order processing, let us consider an example involving three entities: A (a company), B (a customer), and C (a vendor). When A receives a purchase order from B to provide certain goods, it has two choices. The first option is for A to manufacture the requested goods internally, while the second option involves procuring the goods from C, an external vendor.